PROXY CONTESTS FOR CONTROL: THEIR IMPLICATIONS FOR CORPORATE BEHAVIOR.
Item
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Title
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PROXY CONTESTS FOR CONTROL: THEIR IMPLICATIONS FOR CORPORATE BEHAVIOR.
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Identifier
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AAI8119666
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identifier
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8119666
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Creator
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MILLER, ALAN NORMAN.
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Contributor
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Mahmoud A. Wahba
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Date
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1981
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Language
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English
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Publisher
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City University of New York.
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Subject
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Business Administration, General
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Abstract
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Proxy voting is the dominant mode of shareholder decision making in publicly held corporations. Shareholders use proxies to vote on a variety of corporate matters including the election of directors.;Proxy contests between incumbent management and discontented shareholders occur regularly. A proxy contest for control is an attempt by dissident shareholders to obtain enough proxies to elect their candidates to a majority of the positions on a corporation's board.;At present there is no unified explanation of what type of corporations have successful or unsuccessful proxy contests for control and no explanation of how the behavior of firms is related to the occurrence of these phenomena. The purpose of this dissertation is to develop a theory of proxy contests in order to provide these explanations. In doing so, the dissertation evaluates the validity of the theory of the firm (and, in particular, its assumption of profit maximization) and the validity of the Baumol and Blinder theory that the stock market, through its stock pricing process, encourages managements to use their corporations' assets efficiently.;Sixteen hypotheses relating to 16 financial and structural characteristics of corporations are tested. Data regarding these financial and structural characteristics were obtained from 93 publicly traded corporations in various industries which have had a successful or an unsuccessful proxy contest for control between 1964-1978.;Univariate statistical techniques are used to distinguish between corporations which have had a successful and corporations which have had an unsuccessful control contest on the basis of a single financial or structural characteristic. Stepwise discriminant analysis is used to identify those continuous variables which maximally separate the two groups of firms.;The results of the univariate analysis reveal that: (1)the only variables which distinguish between the two groups of firms at the p (LESSTHEQ) .05 level of significance are percentage of management and director ownership of common stock and domestic corporation and (2)there is a significant difference (p < .02) between the number of domestic and the number of multinational corporations which have had a successful control contest.;The results of the stepwise analysis reveal that two discriminant functions can be used to predict categorical group membership. The first function, which contains three continuous variables, can optimally be used to classify corporations which have had an unsuccessful proxy contest for control. The order of entry of each variable into this function (and each variable's consequent discriminatory power) is: (1)rate of return on assets, (2)rate of return on equity, and (3)percentage of management and director ownership of common stock. The second discriminant function can optimally be used to classify corporations which have had a successful control contest. The variables contained in this function and their order of entry are: (1)percentage of management and director ownership of common stock, (2)rate of return on equity, (3)number of corporate offices, plants, and/or subsidiaries located outside the United States, and (4)rate of return on assets.;Using ANOVA to compare measures of profitability and of common stock prices in corporations which have had a successful control contest, an unsuccessful control contest, or no proxy contest reveals that each measure is greater in corporations which have not had a proxy contest. These findings constitute moderate support for the profit maximization assumption of the theory of the firm and for the theory of stock market discipline.;Further exploration of the differences between corporations which have had a successful or an unsuccessful proxy contest for control and relating these findings to applied settings are some areas for future research.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
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Program
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Business
