Gantchev, Nickolay and Giannetti, Mariassunta, The Costs and Benefits of Shareholder Democracy (October 18, 2018). SMU Cox School of Business Research Paper No. 18-35. Available at SSRN: https://ssrn.com/abstract=3269378
We show that while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals if approved and subsequently implemented appear to destroy shareholder value. We show that firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.
As I suspected!
