The Determinants of Withdrawn Shareholder Proposals

Working paper

05-08-11 |

We study more than 12,000 shareholder proposals that have been filed to companies from 1997-2009 and investigate the determinants of proposal withdrawal. We find that institutional ownership is positively and insider ownership negatively related to proposal withdrawal likelihood. Furthermore, proposals sponsored by institutions are also more likely to be withdrawn relative to proposals filed by private investors. Our empirical evidence points to the importance of withdrawn shareholder proposals as a governance mechanism. Managers try to protect their own power and reputation by preventing that filed shareholder proposals are put to a vote during the annual general meeting: They enter into private negotiations with the sponsors of the proposals to accomplish a withdrawal.

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