The voice of retail investors and corporate earnings quality

Guilong Cai, Bingxuan Lin, Rui Lu and Yanan Zhang

Journal of Business Finance & Accounting, 2025, vol. 52, issue 1, 374-402

Abstract: Chinese stock exchanges have launched two investor interactive exchange platforms (IIEPs) to facilitate communication between retail investors and listed companies. Using retail investor posts on the IIEPs as a proxy for monitoring by minority shareholders, we show that minority shareholders can play an active monitoring role in corporate governance and improve earnings quality. We identify coordination among minority shareholders and increased regulatory scrutiny as key mechanisms through which IIEPs exert their influence. This form of monitoring proves critical, especially in the absence or ineffectiveness of traditional oversight bodies like institutional investors, auditors and government regulators. Our findings underscore the constructive role of minority shareholders in corporate governance, challenging the notion of them as passive free riders. Implementing IIEPs could be a valuable model for other nations looking to bolster minority shareholder rights.

Date: 2025
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