Managerial Response Under Shareholder Empowerment: Evidence from Majority Voting Legislation Changes

Cuñat, Vicente; Lu, Yiqing; Wu, Hong

doi:10.2139/ssrn.3219188

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B Institutional Backgrounds Of MV Legislation1

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2023

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“…14 These statistics represent a substantial increase from the mere 10% of S&P 500 companies that did so in 2004. Recent evidence from Cuñat, Lü, and Wu (2019) suggests that after the enactment of MV legislation, firms in states that enacted MV legislation are substantially more likely to install MV than those in states that did not.…”

Section: B Institutional Backgrounds Of MV Legislationmentioning

confidence: 99%

Director Job Security and Corporate Innovation

Hsu¹,

Lu²,

Wu³

et al. 2023

J. Financ. Quant. Anal.

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In this article, we show that firms can become conservative in innovation when their directors face job insecurity. We find that after the staggered enactment of majority voting legislation that strengthens shareholders’ power in director elections, firms produce fewer patents, particularly exploratory patents, and fewer forward citations. This effect is stronger for directors facing higher dismissal costs or threats and for firms with greater needs for board expertise and is mitigated by institutional investors’ expertise in innovation. Overall, our results suggest that heightened job insecurity induces director myopia, which leads to a reduction in investment in risky, long-term innovation projects.

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Section: B Institutional Backgrounds Of MV Legislationmentioning

confidence: 99%