An Empirical Analysis of Advance Notice Provisions in Corporate Bylaws: Evidence from Canada

In recent years, firms have implemented advance notice provisions (ANPs) in their bylaws. ANPs require shareholders to comply with certain procedures and disclosure requirements if they intend to nominate directors at a shareholders’ meeting. With a focus on ANPs, this is the first study that examines bylaw changes from an empirical standpoint. Specifically, we hand collected a comprehensive list of proposed and implemented bylaw amendments between 2004 and 2015 for 1,156 Canadian corporations listed on the Toronto Stock Exchange. We hypothesize that firms more vulnerable to a takeover bid or proxy contest are more likely to propose an ANP. In univariate and multivariate analysis, we find support for this hypothesis along several measures of vulnerability, including exposure or peer exposure to a proxy contest or takeover bid and various measures of shareholder dispersion. We also find evidence to support an alternative hypothesis that firms propose an ANP in lock-step with others in their industry. We also examine the potential rationales for proposing an ANP using an event study. We conclude that ANPs are implemented by vulnerable firms, potentially seeking to impede a change of control, as well as by firms following industry peers making corporate governance changes.