Minority shareholder participation, corporate decisions, and corporate governance

KONG Dongmin1,2 LIU Shasha3

(1.School of Finance, Zhongnan University of Economics and Law)
(2.Hust School of Economics, Huazhong University of Science and Technology)
(3.School of Management, Jinan University)

【Abstract】Using a novel online voting dataset in China’s stock market, we tested a catering theory by investigating impacts of minority shareholders’ pressures on earnings management. We attempted to explore: (1) what is the role of minority shareholder participation (MSP) in corporate governance and (2) does MSP serve as an external monitor to managers, or put excessive pressure on managers? We argued that firms with high MSP levels tend to manage earnings actively. In order to address the potential endogeneity, we exploited the lagged variables approach, propensity score matching, and instrumental variables, finding that our results are robust to both different methods and alternative measures. Additional tests showed that firms with equity financing or insider trading demand, high information asymmetry, and investors with low educational levels are more likely to cater to minority shareholders by earnings management.

【Keywords】 minority shareholders; online voting; natural experiment; corporate governance; earnings management;

【DOI】

【Funds】 Youth Program of National Natural Science Foundation of China (71602074) General Program of National Natural Science Foundation of China (71372130) Distinguished Young Scholars’ Program of Ten-Thousand Talents Program of the Organization Department of the Central Committee of the Communist Party of China

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This Article

ISSN:1002-5502

CN: 11-1235/F

Vol , No. 09, Pages 101-115+188

September 2017

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Article Outline

Abstract

  • 1 Introduction
  • 2 Institutional background and research hypothesis
  • 3 Data source and variable definition
  • 4 Empirical test
  • 5 Additional tests
  • 6 Conclusion
  • References