Equity Issuances and Agency Costs: The Telling Story of Shareholder Approval around the World Clifford G. Holderness∗ January 2016 Shareholder approval of equity issuances varies considerably. When shareholders must approve issuances, average announcement returns are positive. When managers unilaterally issue stock, returns are 4% lower and negative. The closer the vote is to the issuance or the greater is the required plurality, the higher are the returns for public offers, rights offers, and private placements. Shareholders favor rights offers and seldom approve public offers. Managers favor public offers and seldom choose rights offers. These findings hold across and within 23 countries, including the United States, suggesting that agency problems affect equity issuances and that shareholder approval reduces these costs. (JEL G32, G14, G15) Keywords: Equity offerings, agency costs, mandatory shareholder voting, corporate governance. © Copyright 2015. Clifford G. Holderness. All rights reserved. * Boston College, Carroll School of Management (
[email protected]). I thank Vladimir Atanasov, David Chapman, Alex Edmans, Rainer Gawlick, Stuart Gillan, Edith Ginglinger, Dirk Jenter, Michael Klausner, Nadya Malenko, William Mann, David McLean, Jeffrey Pontiff, Jonathan Reuter, Stefano Rossi, Dennis Sheehan, Philip Strahan, David Yermack, and seminar participants at the BI Conference on Corporate Governance, Boston College, ESCP Paris, the Frontiers in Finance Conference, and the University of Pittsburgh for comments. John Bagamery