Does Implementation of the Stewardship Code Affect Investors' Judgment and Decision-Making on Firm's Negative Information?

57 Pages Posted: 17 Dec 2019

See all articles by Haerin Shim

Haerin Shim

Graduate School of Science in Taxation, University of Seoul

JeongEun Koo

The University of Seoul - Graduate School of Science in Taxation

Taesup Shim

Graduate School of Science in Taxation, University of Seoul

Date Written: November 17, 2019

Abstract

Since 2010, the Stewardship Code (SC) or similar regulations have been introduced to enhance the quality of institutional investors' engagement and to improve long-term firm value. Although some prior anecdotal or legal studies have expressed skepticism toward the effectiveness of the SC, there has been little empirical evidence regarding the effects of these policies. Accordingly, the purpose of this paper is to investigate how the implementation of the SC affects nonprofessional investors’ judgment and decision-making on an investee firm facing negative issues. Based on the results of a quasi-experiment with Korean nonprofessional investors, we show that the implementation of the SC may negatively impact nonprofessional investors' assessments of the firm, contrary to the intended purpose of SC adoption. This study provides timely implications for the future operation and development of the stewardship policies recently adopted in many countries.

Keywords: Stewardship Code, institutional shareholders, nonprofessional investors, corporate governance, experiment

JEL Classification: G30, G32, G34, G38

Suggested Citation

Shim, Haerin and Koo, JeongEun and Shim, Taesup, Does Implementation of the Stewardship Code Affect Investors' Judgment and Decision-Making on Firm's Negative Information? (November 17, 2019). Available at SSRN: https://ssrn.com/abstract=3488618 or http://dx.doi.org/10.2139/ssrn.3488618

Haerin Shim (Contact Author)

Graduate School of Science in Taxation, University of Seoul ( email )

Korea, Republic of (South Korea)

JeongEun Koo

The University of Seoul - Graduate School of Science in Taxation ( email )

Korea, Republic of (South Korea)

Taesup Shim

Graduate School of Science in Taxation, University of Seoul ( email )

Seoul
Korea, Republic of (South Korea)
82-2-6490-5039 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
27
Abstract Views
175
PlumX Metrics