Abstract
This paper reviews the theoretical and empirical contributions to the proxy contest literature. The theoretical work, to date, suggests that (1) the use of the proxy contest as a method of taking over a corporation depends on its cost relative to the tender offer; (2) the security voting structure and the debt/equity ratio influence the outcome of the proxy contest; and, (3) the value of a proxy contest can be estimated using the principles of option pricing theory. A review of empirical research indicates that (1) firms which are inefficiently managed are more likely to become the target of a proxy fight; (2) wealth gains accrue to shareholders of contested firms during the contest period; and, (3) incumbent management is more likely to succeed in a proxy fight but not necessarily ‘win’.
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