What is it about?

This article synthesizes some recent progress in the theories of corporate control and political lobbying to model the proxy campaign as a political campaign. The model yields a number of testable implications, only some of which have been examined in the literature. For example, if the loss from voting for a “bad” dissident exceeds the gain from voting for a “good” dissident, the model predicts that as communication costs fall, the number of proxy fights increases, announcement day returns decrease, and the fraction of dissident wins first increases and then decreases.

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Why is it important?

The regulators were making it easier for challengers to launch proxy campaigns against incumbent management in the 1990s. This paper shows that this could lead to some unintended consequences: though the number of campaigns increased, the proportion of bad challengers also increased.

Perspectives

I took a class on analytical political science to learn how to model proxy campaigns as political campaigns.

Professor Utpal Bhattacharya
Hong Kong University of Science and Technology

Read the Original

This page is a summary of: Communication Costs, Information Acquisition, and Voting Decisions in Proxy Contests, Review of Financial Studies, October 1997, Oxford University Press (OUP),
DOI: 10.1093/rfs/10.4.1065.
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