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

63 Pages Posted: 1 Jul 2020 Last revised: 30 Nov 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 disclosure are endogenously determined. We exploit locally exogenous variations in corporate governance created by “close-call” governance-related shareholder proposals to examine whether the narrow passing of such proposals causally affects the narratives in disclosures. We find that the passage of governance-related proposals within the 5% bandwidth at the 50% threshold significantly increases the textual similarity in the narratives of 10-Ks. Moreover, firms that narrowly passed governance-related proposals within the 10% bandwidth also disclosed more with increased accounting complexity and poor readability, providing empirical support to the models that treat better governance and disclosures as substitutes rather than complements.

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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