Does regulatory reform of cumulative voting promote a more balanced power distribution in the boardroom?

Yinghui Chen and Julan Du

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: In the presence of dominant shareholders, it remains uncertain whether the introduction of cumulative voting (CV) in board elections can elevate board representation of non-controlling substantial shareholders and curb the expropriation of minority shareholders by dominant shareholders. With hand-collected director-level data, we conduct DID-style analysis of China's CV reform. We find that non-controlling substantial shareholders cooperated in voting to raise their board representation, and CV implementation curbed tunneling activities and enhanced firm value. The results are especially strong in a subsample of firms whose second largest shareholder has a sufficiently large ownership proportion to elect her/his favored candidates onto boards.

Keywords: Cumulative voting; Board representation; Balanced board power distribution; Corporate tunneling (search for similar items in EconPapers)
JEL-codes: G34 K22 L22 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920300997

DOI: 10.1016/j.jcorpfin.2020.101655

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