The Impact of Tightly Contested Governance Proposals on Firms' Narrative Disclosures: Evidence from a Regression-Discontinuity Design (RDD)

78 Pages Posted: 1 Jul 2020 Last revised: 16 Jan 2021

See all articles by Abhishek Ganguly

Abhishek Ganguly

University of Oklahoma

Arup Ganguly

University of Mississippi

Lin Ge

University of Mississippi

Chad J. Zutter

University of Pittsburgh

Date Written: January 15, 2021

Abstract

Corporate governance and firm disclosure are endogenously determined. We exploit locally exogenous variations in corporate governance created by “close-call” governance-related shareholder proposals, using a fuzzy RDD and text analytics to examine whether better corporate governance causally affects the narratives in corporate disclosures. We find that although better corporate governance in firms leads to more disclosure in their 10-K filings, the passage of “close-call” governance proposals also significantly increases the complexity and the boilerplate nature of such disclosures. These results are robust to several robustness tests, alternative RDD bandwidths, and different specifications, and amplified when the investors are undistracted.

Keywords: Corporate governance, Textual Disclosure, Endogeneity, Regression Discontinuity Design (RDD), Computational Linguistics, Investor Distraction

JEL Classification: G23, G30, G34

Suggested Citation

Ganguly, Abhishek and Ganguly, Arup and Ge, Lin and Zutter, Chad J., The Impact of Tightly Contested Governance Proposals on Firms' Narrative Disclosures: Evidence from a Regression-Discontinuity Design (RDD) (January 15, 2021). Available at SSRN: https://ssrn.com/abstract=3622799 or http://dx.doi.org/10.2139/ssrn.3622799

Abhishek Ganguly

University of Oklahoma ( email )

Norman, OK 73019
United States

Arup Ganguly (Contact Author)

University of Mississippi ( email )

Oxford, MS 38655
United States

Lin Ge

University of Mississippi ( email )

Oxford, MS 38655
United States

Chad J. Zutter

University of Pittsburgh ( email )

352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~czutter/

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