Say Pays! Shareholder Voice and Firm Performance

Cuñat, Vicente and Gine, Mireia and Guadalupe, Maria (2013): Say Pays! Shareholder Voice and Firm Performance.

Abstract

This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder "voice" by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.

• Item Type: MPRA Paper
• Language: English
• Keywords: Say-on-Pay;Shareholder Voice; Executive Compensation; Firm Performance; Governance
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M12 - Personnel Management ; Executives; Executive Compensation

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