The market reaction to corporate governance regulation

• 成果类型: Article
• 署名作者: Larcker, David F.; Ormazabal, Gaizka; Taylor, Daniel J.
• 署名单位: Stanford University; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.03.002
• 发表日期: 2011
• 页码: 431-448
• 关键词: CORPORATE GOVERNANCE; Executive compensation; Proxy access; regulation; BLOCKHOLDERS

摘要

This paper investigates the market reaction to recent legislative and regulatory actions pertaining to corporate governance. The managerial power view of governance suggests that executive pay, the existing process of proxy access, and various governance provisions [e.g., staggered boards and Chief Executive Officer (CEO)-chairman duality] are associated with managerial rent extraction. This perspective predicts that broad government actions that reduce executive pay, increase proxy access, and ban such governance provisions are value-enhancing. In contrast, another view of governance suggests that observed governance choices are the result of value-maximizing contracts between shareholders and management. This perspective predicts that broad government actions that regulate such governance choices are value destroying. Consistent with the latter view, we find that the abnormal returns to recent events relating to corporate governance regulations are, on average, decreasing in CEO pay, decreasing in the number of large blockholders, decreasing in the ease by which small institutional investors can access the proxy process, and decreasing in the presence of a staggered board. (C) 2011 Elsevier B.V. All rights reserved.