Reputation Concerns of Independent Directors: Evidence from Individual Director Voting

Review of Financial Studies, Forthcoming

59 Pages Posted: 16 Mar 2012 Last revised: 5 Dec 2015

See all articles by Wei Jiang

Wei Jiang

Columbia Business School - Finance and Economics

Hualin Wan

Shanghai Lixin University of Commerce

Shan Zhao

Grenoble Ecole de Management

Date Written: July 1, 2012

Abstract

Using a unique dataset of board proposal voting by individual independent directors of public companies in China from 2004 to 2009, we analyze the effects of career concerns and current reputation stock on independent directors’ propensity to confront management. Younger directors and directors in their second (and last) terms, who have stronger outside career concerns, are more likely to be aligned with investors rather than the managers. Directors with higher reputation stocks (measured by mentions in news articles and the number of board seats) are also more likely to dissent. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities and the avoidance of regulatory sanctions. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher reputation.

Keywords: Independent directors, director voting, career concerns

JEL Classification: G34, L25

Suggested Citation

Jiang, Wei and Wan, Hualin and Zhao, Shan, Reputation Concerns of Independent Directors: Evidence from Individual Director Voting (July 1, 2012). Review of Financial Studies, Forthcoming . Available at SSRN: https://ssrn.com/abstract=2023146 or http://dx.doi.org/10.2139/ssrn.2023146

Wei Jiang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Hualin Wan

Shanghai Lixin University of Commerce ( email )

2800 Wenxiang Road
Shanghai
China

Shan Zhao (Contact Author)

Grenoble Ecole de Management ( email )

Grenoble, 38003
France

HOME PAGE: http://sites.google.com/site/zhaoshan75/

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