Vote Avoidance and Shareholder Voting in Mergers and Acquisitions

Abstract

We examine whether, how, and why acquirer shareholder voting matters. We show that acquirers with low institutional ownership, high deal risk, and high agency costs are more likely to bypass shareholder voting. Such acquirers have lower announcement returns and make higher offers than those who do not. To avoid a shareholder vote, acquirers increase equity issuance and cut payouts to raise the portion of cash in mixed-payment deals. Employing a regression discontinuity design, we show a positive effect on acquirer announcement returns concentrated in acquirers with higher institutional ownership. We conclude that shareholder voting mitigates agency problems in corporate acquisitions. Received April 18, 2017; editorial decision February 9, 2018 by Editor David Denis. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online.