Agency costs and corporate governance: Evidence from proxy contests
|dc.identifier.citation||Wood, C. (2005, February 8). Agency costs and corporate governance: Evidence from proxy contests (Thesis). Retrieved from http://hdl.handle.net/10523/1361||en|
|dc.description.abstract||This thesis examines the impact of a proxy contest on the firm and the wealth of its shareholders. I find that proxy contests serve their intended purpose as an effective external disciplining mechanism, resulting in changes to the incumbent board and improvement in the firms performance. Pre-contest and contest period abnormal returns are similar across all firms subject to a proxy contest. Over the pre-contest period, target firms experience significantly negative stock price performance. The announcement and full contest periods result in a positive stock price reaction for all firms, suggesting that the market views the initiation of a proxy contest as good news. Agency theory suggests that a proxy contest should reduce the problems involved with a separation between principal and agent. To examine this relation, a subsample containing those firms with high free cash flow and low Tobin's Q is examined, Interesting differences in the stock price performance between firms in which dissidents 'win' seats and 'do not win' seats become apparent in the post-contest period. When dissidents 'win' seats, target firms stock prices experience a statistically significant wealth appreciation. Subsequent tests attribute such wealth gains to reduced agency problems through a reduction in capital expenditure and research and development expenditure. When dissidents 'do not win' seats, no attempt to reduce agency costs is apparent, and as a result, these firms experience a sustained wealth loss over the years surrounding a proxy contest. The steps taken to reduce agency costs in those firms in which dissidents 'win seats' suggests that proxy contests fulfil their intended role -- to discipline the board and to improve firm performance.||en_NZ|
|dc.subject||external disciplining mechanism||en_NZ|
|dc.subject||stock price performance||en_NZ|
|dc.subject||discipline the board||en_NZ|
|dc.title||Agency costs and corporate governance: Evidence from proxy contests||en_NZ|
|otago.school||Finance and Quantitative Analysis||en_NZ|
|thesis.degree.discipline||Finance and Quantitative Analysis||en_NZ|
|thesis.degree.grantor||University of Otago||en_NZ|
|otago.school.eprints||Finance & Quantitative Analysis||en_NZ|
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