Of What Value Are Shareholder Proposals Sponsored by Public Pension Funds?

This study finds that public pension fund proposals act as a signaling mechanism in alerting the market that management is unwilling or unable to negotiate a settlement with the public fund in order to prevent the submission of the proposal. We find that firms receiving proposals for the first time experience a transitory decrease in shareholder wealth, while firms targeted repeatedly exhibit negative wealth effects over much wider event windows. Long-run changes in the firms' operating performance and stock price returns are consistent with these results. A comparison of corporate governance characteristics provides further insight into our findings.