Of what value are shareholder proposals sponsored by public pension funds?

This study finds that public pension fund proposals act as a signaling mech anism in alerting the market that management is unwilling or unable to nego tiate a settlement with the public fund in order to prevent the submission of the proposal. We find that firms receiving proposals for the first time experience a transitory decrease in shareholder wealth, while firms targete d repeatedly exhibit negative wealth effects over much wider event windows. Long-run changes in the firms' operating performance and stock price retur ns are consistent with these results. A comparison of corporate governance characteristics provides further insight into our findings.