Minority Shareholder Participation, Corporate Decisions, and Corporate Governance: Evidence from a Natural Experiment
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| Title | Minority Shareholder Participation, Corporate Decisions, and Corporate Governance: Evidence from a Natural Experiment
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| Author | Kong Dongmin and Liu Shasha |
| Organization | School of Economics, Huazhong University of Science and Technology;Guanghua School of Management, Peking University |
| Email | kongdm@hust.edu.cn；sarahliu@pku.edu.cn |
| Key Words | Minority Shareholders; Online Voting; Natural Experiment; Corporate Governance; Earnings Management |
| Abstract | Using a novel online voting dataset in China’s stock market, we test a catering theory by investigate impacts of minority shareholders’ pressures on earnings management. We attempt to answer: 1) what is the role of minority shareholders participation (MSP) in corporate governance? and 2) does MSP serve as an external monitor to managers, or does it put excessive pressure on them? We find that firms with high MSP levels tend to manage earnings more actively. In order to address the potential endogeneity, we use lagged variables approach, propensity score matching and difference-in-difference methods, and three instrumental variables based on share split event, the number of shareholder accounts and market status, through which we find that our results are robust to different methods and alternative measures. Finally, we find that firms with high information asymmetry, voting for important proposals, and more managerial incentives or financial expertise, are more likely to cater to minority shareholders by earnings management. |
| Serial Number | WP825 |
| Time | 2015-02-13 |
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