Research

Unanimous board votes can reflect active monitoring before the meeting, rather than weak oversight. Using unique Chinese board disclosures, we find that greater opportunities for pre-vote director communication are associated with fewer board proposals raising agency concerns. Vote delegation following personal shocks to attendance captures pre-vote director contact and shows that pre-vote coordination among independent directors and bargaining with insiders are associated with fewer agency-concerning proposals on the board agenda. Director absence and remote participation, which do not require pre-vote director contact, show no significant reduction in such proposals. Exploiting a policy reform that expands pre-vote communication among independent directors, we find that broader communication improves firm value, especially when the committee that screens problematic proposals before the reform is not independent.

When does shareholder voice lead to exit, and when does it encourage shareholders to seek greater control? Using public disclosures of director voting in China, we study how blockholders trade following dissent by their appointed directors. We find that trading responses depend on shareholders’ ownership stakes and the nature of disagreement. Minority shareholders tend to sell shares following dissent by their directors, with smaller shareholders selling a larger fraction of their holdings. In contrast, the largest shareholder tends to buy following dissent by its directors. These trading responses are concentrated in accounting and disclosure-related disagreements, while dissent on tunneling-related proposals is associated with little subsequent trading by dissenting shareholders. Our findings highlight how shareholder voice in the boardroom can influence the evolution of corporate ownership and control.

We find that pressure on firms to advance stakeholder interests can intensify conflicts between controlling and minority shareholders. Using unique data on board agendas in China, we exploit the staggered rollout of central environmental inspection policies to study private firms’ responses to public environmental pressure. Greater public environmental pressure shifts board agendas toward green projects but with greater tunneling concerns (related-party transactions), without a corresponding increase in arm’s-length green projects. Directors representing large minority blockholders constrain the initiation of these green tunneling projects. However, these projects’ green label weakens regulatory and shareholder scrutiny towards tunneling. Our findings suggest that controllers can exploit the public legitimacy of green projects while shifting the associated green costs to minority shareholders through tunneling.

Social policy can encourage pro-social shareholders’ activism while leaving other shareholders polarized. We study the staggered expansion of Medicaid across U.S. states to examine how socially-oriented state policies shape shareholder engagement through socially-oriented shareholder proposals. Firms headquartered in expansion states reflect a shift toward more pro-social norms in those states and receive more pro-social proposals from shareholders. However, these socially oriented proposals become more likely to be withdrawn and receive less support when they reach a vote, reflecting disapproval from other shareholders. Our findings suggest that public enforcement of socially oriented policies can intensify polarization among shareholders in their attitudes toward firms’ social responsibilities.

Corporate scandals can damage a firm’s reputation while increasing its visibility in the competition for attention. Using a randomized field experiment in China, we examine how these competing effects shape the interview prospects of entry-level candidates with experience at scandal-tainted firms when they apply for new jobs. Fictitious résumés listing experience at scandal-tainted firms receive interview callbacks at a rate of 10.5%, compared with 6% for applications listing experience at firms without scandals, representing a 75% increase. Rational factors such as labor-market conditions, the characteristics of recruiting firms and former employers, and applicants’ other characteristics do not explain the result. Public attention to scandals, measured by Baidu search volume, explains substantial variation in callback rates. The findings suggest that the benefits of attention can outweigh concerns associated with a former employer’s misconduct, which reveals how corporate visibility can benefit former employees when they compete for attention in the job market.