An Analysis Of The Levels And Patterns Of Shareholder Rights: 1990 - 2006

Abstract

Greater attention is being paid to the issue of shareholder rights and corporate governance, particularly since the scandals of 1990s and 2000s and the stock market decline of the new millennium. This study advances the concept of an optimum level of shareholder rights in corporate governance and analyzes the long-run trends in shareholder rights versus management entrenchment, using the G-Index. This study finds that the level of shareholder rights generally has not increased, despite the legislative and regulatory reforms of the 2000s and contrary to the general perception. Rather, shareholder rights have declined amongst the large, S&P 500 companies. The paper also finds that there has been a tendency on the part of firms to converge to a median-level/norm of shareholder rights. Evidence further suggests that firms are searching for an optimum level that balances the risks and rewards of greater shareholder rights.