Do You Hear the People’s Saying? - The Voice of Individual Investors

66 Pages Posted: 30 Nov 2020

See all articles by Jacky Chau

Jacky Chau

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Shufang Lai

Southern University of Science and Technology

Yong George Yang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration

Date Written: October 29, 2020

Abstract

In a setting where regulators provide a curated online platform to facilitate management access by individual investors, we examine the “voice” of individual shareholders in their interaction with firm management. We find that the timing and content of online postings directed to management from individual investors are generally responsive to significant corporate events. Besides information acquisition, individual investors sometimes convey criticisms and suggestions to management. Individual investors collectively turn more active in their online engagements with management when there are signs of weaker external monitoring from institutional investors or weaker managerial incentive alignment with shareholders. Individual investors also tend to step up their engagement efforts after their followed firm experiences poor performance. Additionally, we observe increased engagements by individual investors during securities rules violations and these engagements are associated with sooner enforcement actions on the violations. Our findings suggest that, empowered by a conducive regulatory environment, individual investors could manifest active monitoring incentives when the perceived benefits are sufficiently high.

Keywords: Shareholder Monitoring, Retail Investors, Corporate Governance, Information Demand, Investor Communication

JEL Classification: G10, G23, M40

Suggested Citation

Chau, Yuen-Kit and Lai, Shufang and Yang, Yong George, Do You Hear the People’s Saying? - The Voice of Individual Investors (October 29, 2020). Available at SSRN: https://ssrn.com/abstract=3721526 or http://dx.doi.org/10.2139/ssrn.3721526

Yuen-Kit Chau (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Shufang Lai

Southern University of Science and Technology ( email )

No 1088, xueyuan Rd.
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

Yong George Yang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration ( email )

Shatin, N.T.
Hong Kong

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