2021/02/01 by John G. Matsusaka, Oguzhan Ozbas, Irene Yi
Business, Management and Accounting · #Auditing, Earnings Management, Governance #Corporate Finance and Governance #Corporate Taxation and Avoidance
paper · doi:10.1086/710828
crossref issued 2021/02/01 · crossref published 2021/02/01 · crossref published-print 2021/02/01 · openalex publication_date 2021/02/01 · crossref created 2021/05/20 · crossref deposited 2021/05/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/22 · crossref indexed 2026/07/31
This paper studies Securities and Exchange Commission (SEC) no-action-letter decisions that determine whether companies can exclude shareholder proposals from their proxy statements. During 2007–19, the market reacted positively when the SEC permitted exclusion, which suggests that investors viewed those proposals as value reducing on average. We also find that a company’s stock price decreased over time while waiting for an SEC decision, which suggests that challenged proposals imposed distraction costs on companies. The SEC’s decisions can be predicted by regulatory rules but are also related to a proposal’s predicted votes—more popular types of proposals were less likely to be removed. We find no robust evidence that no-action-letter decisions differed when the SEC was controlled by Democrats versus Republicans. Taken together, the evidence suggests that managers may be serving shareholder interests in opposing some proposals and that the no-action-letter process may be helping shareholders by weeding out value-reducing proposals.