Large Shareholders, Shareholder Proposals, and Firm Performance: Evidence from Japan
Version of Record online: 4 FEB 2014
© 2014 John Wiley & Sons Ltd
Corporate Governance: An International Review
Volume 22, Issue 4, pages 312–329, July 2014
How to Cite
Yeh, T.-m. (2014), Large Shareholders, Shareholder Proposals, and Firm Performance: Evidence from Japan. Corporate Governance: An International Review, 22: 312–329. doi: 10.1111/corg.12052
- Issue online: 8 JUL 2014
- Version of Record online: 4 FEB 2014
- Japan Society for the Promotion of Science
- Akita International University
- Corporate Governance;
- Large Shareholder;
- Shareholder Proposal;
- Shareholder Meeting
Previous studies, primarily based on evidence from the United States, fail to link shareholder activism to firm performance, with one explanatory factor being that the legal and regulatory system in the United States limits the anti-director rights of shareholders. This study is motivated by the question of whether legally binding shareholder resolutions can pressure management to improve firm performance and to enhance firm value.
By investigating 135 publicly listed Japanese firms which received shareholder resolutions from 2004 to 2010, this study finds supportive evidence for shareholder proposals. Announcement-associated abnormal returns are higher for firms receiving election-related proposals by large sponsors, than those unrelated to board election. Furthermore, an improving trend begins to appear in the post-resolution year, particularly significant for firms receiving proposals to remove board members.
This study provides new evidence suggesting that large shareholder activism in Corporate Japan can perform roles that used to be played by main banks before the 1990s. It also suggests that in countries where there is no active takeover market, large shareholders can effectively discipline entrenched management through active engagement.
This study offers insights to corporate managers on the importance of communicating with large shareholders and addressing their concerns.