Tag Archives | John G. Matsusaka

Gadfly Proposals Reduce Value?

Deal Professor Envisions Corporate Gadfly

Starting with Corporations

Gadfly proposal on your corporate proxy? One implicit conclusion from a recent academic study is that you should short the company as soon as the SEC disapproves the company’s no-action request, since a proposal from a gadfly is likely to reduce the company’s value. Even though their intent is primarily to show why managers generally oppose proposals, that is the takeaway investment strategy one might conclude from a paper by John G. Matsusaka, Oguzhan Ozbas and Irene Yi entitled Why Do Managers Fight Shareholder Proposals? Evidence from No-Action Letter Decisions. (Why Do Managers Fight Shareholder Proposals, pdf)

Investors Skeptical of Gadfly Proposals

Researchers found a statistical correlation between Securities and Exchange Committee (SEC) staff decisions to block a no-action request and negative abnormal returns over the period of 2007-2016, “suggesting that investors agree with managers that these proposals are value-destroying.” “[O]ur main finding is that the market responded positively to the granting of a no-action letter.” “Investors are not particularly skeptical of proposals by unions and public pensions, but appear to view proposals by individual ‘gadfly’ shareholders as value-destroying.” Continue Reading →

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