The Efficient Monitoring Role of Proxy Contests: An Empirical Analysis of Post-Contest Control Changes and Firm Performance

Abstract

We present an empirical analysis of the subsequent disposition and share price performance of 142 firms involved in proxy contests for board seats in the period 1962-1986. We find evidence that proxy contests increase corporate efficiency through improved monitoring of firms, even in the absence of takeover-related control activity. Our results support the view that proxy contests are an effective managerial disciplinary mechanism in the absence of a takeover.