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Martijn Cremers & Allen Ferrell, Thirty Years of Shareholder Rights and Stock Returns (AFA 2013 San Diego Meetings Paper, 2012).

Abstract: This paper explores the robustness of the positive association between shareholder rights and abnormal stock returns (using the Fama-French-Cahart four factor model) and potential explanations thereof. Utilizing hand-collected shareholder rights data for the 1978-1989 period in conjunction with the existing post-1990 RiskMetrics data, we document that: (1) over the 1978-2007, the association is generally robust to a variety of controls and estimating abnormal returns at the portfolio or firm-level; (2) this association co-varies with merger and acquisition (M&A) waves; (3) while being acquired and making acquisitions are both strongly associated with abnormal stock returns, these effects do not explain the positive association; and (4) once the four factor model is supplemented with the Cremers, Nair & John (2009) takeover factor – which captures risk associated with time-varying investment opportunities and thus relates to the state of the M&A market – the association disappears.