AffiliationUniv Arizona, Eller Coll Management
MetadataShow full item record
PublisherOXFORD UNIV PRESS
CitationCraig Doidge, Alexander Dyck, Hamed Mahmudi, Aazam Virani, Collective Action and Governance Activism, Review of Finance, Volume 23, Issue 5, September 2019, Pages 893–933, https://doi.org/10.1093/rof/rfz008
JournalREVIEW OF FINANCE
Rights© The Author(s) 2019. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at email@example.com.
AbstractWe examine how an investor collective action organization (ICAO) enhances activism by institutional investors. The ICAO initiated a new form of engagement-private meetings with independent directors to discuss governance proposals. Compared with a single investor acting alone, the ICAO has stronger incentives to engage in activism. Its dollar holdings and voting power are six times larger and predict direct access to the board and the firms it engages. Firms engaged by the ICAO are at least 58% more likely than non-engaged firms to adopt the ICAO's governance proposals that include adoption of majority voting, say-on-pay, and specific compensation policies. Engaged firms also increase CEO incentive pay. An event study around the announcement of the ICAO's formation shows a positive impact on value that increases in both dollar holdings and voting power. We conclude that institutional investors improve governance outcomes through collective action.
Note24 month embargo; published online: 17 May 2019
VersionFinal accepted manuscript
SponsorsRotman International Centre for Pension Management