Editor’s Note: The following post comes to us from Jonathan Cohn of the Department of Finance at the University of Texas at Austin, Stuart Gillan of the Department of Finance at Texas Tech University, and Jay Hartzell of the Department of Finance at the University of Texas at Austin.
In the paper, On the Optimality of Shareholder Control: Evidence from the Dodd-Frank Financial Reform Act, which was recently made publicly available on SSRN, we use three events involving the adoption of the SEC's “proxy access" rule in 2010 as natural experiments to test the effects of allocating more direct control to shareholders on firm value. Of particular importance, all three events contained information that was plausibly surprising to the market. We use information about proposed changes to specific aspects of the rule, along with variation in stock ownership by known activist institutional investors, to identify the impact of shocks to control rights on shareholder value.
