Abstract
AbstractIf a manager‐shareholder is better informed about the true value of a firm's shares than outside shareholders, then the management of an undervalued firm is hypothesized to use its incumbent advantage to win proxy contests to maintain control and to benefit from share revaluations induced by the positive signal value of the contest. Using insider trades as indicators of management's beliefs, this study finds an association between insider beliefs and proxy contest outcomes. In particular, when insider trades over a five‐to‐six month period preceding the proxy date are net purchases, the odds in favor of management winning are significantly higher.
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