Say Pays! Shareholder Voice and Firm Performance

Source: Vicente Cuñat, Mireia Gine, Maria Guadalupe, Centre for Economic Policy Research (CEPR), CEPR Discussion Paper No. DP10141, September 2014
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From the abstract:
This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder “voice” by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4%) and to improvements in longterm performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP serves as a regular vote of confidence on the CEO, that leads to higher efficiency and market value.