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Are Shareholder Proposals All Bark and No Bite? Evidence from Shareholder Resolutions to Rescind Poison Pills

Published online by Cambridge University Press:  06 April 2009

John M. Bizjak  and
Christopher J. Marquette
John M. Bizjak
Affiliation:
Portland State University, School of Business Administration, PO Box 751 Portland, OR 97207
Christopher J. Marquette
Affiliation:
Texas A&M University, Department of Finance, College Station, TX 77843
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Abstract

We provide a comprehensive examination of shareholder resolutions to rescind poison pills. We find that pill rescission proposals are more frequent the more negative the market reaction to the initial pill adoption and the lower the insider and unaffiliated block ownership. Votes for such a proposal increase when performance is poor and for more onerous poison pills. While we document a stock price decline associated with the proposal announcements, we find poison pills are more likely to be restructured or rescinded when there is a shareholder resolution. Moreover, pill revisions are associated with stockholder wealth increases. Collectively, our results suggest that pill rescission proposals are more frequent when the pill is more likely to harm shareholders and that managers respond to shareholder proposals.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 33 , Issue 4 , December 1998 , pp. 499 - 521
Copyright
Copyright © School of Business Administration, University of Washington 1998

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