Does mandatory shareholder voting prevent bad acquisitions? The case of the United Kingdom

Shareholder “referendum” voting on acquisitions is controversial. In most countries acquisition decisions are delegated to boards and shareholder approval is discretionary, which makes existing empirical studies inconclusive. We study the U.K. where approval is mandatory for large deals. U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. Regression discontinuity analyses support a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.