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Non-controlling shareholders' governance participation and corporate misconduct: Evidence from voting in general meetings

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  • Lu, Qiaoshan
  • Xiang, Cheng
  • Li, Bingxiang
  • Feng, Lixuan

Abstract

This study explores the governance role of non-controlling shareholders (NCSs) in Chinese firms by examining the impact of their general meeting participation on corporate misconduct. We find that higher NCS voting shares lead to less corporate misconduct, and the impact is more pronounced for firms with worse internal control or audit quality and less analyst or media coverage. The two-stage regression results based on the instrumental variable approach suggest that the impact is casual. Channel tests show that NCSs' general meeting participation reduces misconduct by mitigating controlling shareholders' tunneling and improving firms' information environment. Finally, we document that the negative impact of NCSs' governance participation on corporate misconduct increases firm value by reducing the firm's future stock price crash risk.

Suggested Citation

  • Lu, Qiaoshan & Xiang, Cheng & Li, Bingxiang & Feng, Lixuan, 2023. "Non-controlling shareholders' governance participation and corporate misconduct: Evidence from voting in general meetings," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:pacfin:v:81:y:2023:i:c:s0927538x23001890
    DOI: 10.1016/j.pacfin.2023.102118
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    More about this item

    Keywords

    Non-controlling shareholders; General meetings; Shareholder activism; Corporate misconduct; China;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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