[We document market anticipation of merger bids and show that less anticipated bids earn significantly higher announcement returns. Subsequent bidders in the industry experience significant and positive abnormal returns around the time of initial industry bid announcements. These results suggest that announcement period returns underestimate the wealth effects of bidding. After accounting for anticipation, bidding activity is, on average, a significant wealth-creating event. Moreover, bidders pursuing public targets increase shareholder wealth and bidders in stock swaps do not lose. These results contradict conventional wisdom. Our results shed light on the correct magnitude of acquisition returns and on the transfer of information throughout an industry around the time of an economic shock.]

Congress and activists recently proposed giving shareholders a say (vote) on executive pay. We find that when the House passed the Say-on-Pay Bill, the market reaction was significantly positive for firms with high abnormal chief executive officer (CEO) compensation, with low pay-for-performance sensitivity, and responsive to shareholder pressure. However, activist-sponsored say-on-pay proposals target large firms, not those with excessive CEO pay, poor governance, or poor performance. The market reacts negatively to labor-sponsored proposal announcements and positively when these proposals are defeated. Our findings suggest that say-on-pay creates value for companies with inefficient compensation but can destroy value for others.

We document market anticipation of merger bids and show that less anticipated bids earn significantly higher announcement returns. Subsequent bidders in the industry experience significant and positive abnormal returns around the time of initial industry bid announcements. These results suggest that announcement period returns underestimate the wealth effects of bidding. After accounting for anticipation, bidding activity is, on average, a significant wealth-creating event. Moreover, bidders pursuing public targets increase shareholder wealth and bidders in stock swaps do not lose. These results contradict conventional wisdom. Our results shed light on the correct magnitude of acquisition returns and on the transfer of information throughout an industry around the time of an economic shock.