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Tenure Stages and Independent Directors’ Voting Behavior
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TitleTenure Stages and Independent Directors’ Voting Behavior  
AuthorZheng Zhigang,Kan Shuo,Lin Yikun,Hu Bo and Huang Jicheng  
OrganizationRENMIN University of China;Peking University 
Key WordsTenure Stages; the Vertical Divergence of Independent Director Characteristics; Negative Opinion; Staggered Independent Directors System 
AbstractIndependent directors in China’s listed firms are not allowed to serve more than two terms according to the relevant provisions. Only independent directors in their first term will face the reappointment problem. However, the directors who vote against management proposals in their first term are less likely to be reappointed. Such adverse selection phenomena warn the independent directors to avoid saying “No” to the management proposals, especially in their first term. Based on the unique data of voting results in China’s listed firms which are required to disclose, we find the probability of voting against management proposals, when independent directors are in the second term, is 0.41 times higher than in the first term, and the agency costs are higher in the firms whose board is mainly comprised of independent directors in their first term. This paper, therefore, provide empirical evidence that the stage characteristics of tenure will affect independent directors’ supervision behaviors. Our policy suggestion is that the formal system of staggered independent directors should be introduced in China’s listed firms. Such practice would push independent directors stay in their different stages of tenure and thus attenuate the effect of stage characteristics of tenure on independent directors’ supervision behavior. 
Serial NumberWP1051 
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