Abstract
This paper investigates how proxy fights function to discipline corporate boards of directors to function as agents of the shareholders. One hundred and ninety six proxy fights are investigated between 1988 and 2009 to examine those factors which determine the most closely associated with winning or losing a proxy fight. Dissidents are found to be most likely to initiate and win a proxy fight when cumulative excess shareholder returns are negative. It is concluded that while declines in shareholder wealth do stimulate proxy fights, a semi-strong efficient market interpretation of financial performance leaves ample room for the successful defense of managerial policies and actions. Proxy fights provide an opportunity for dissidents to challenge these policies and actions often enough for proxy fights to be an effective mechanism for compelling fiduciary behavior by corporate boards.
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