| The Free-riding Problem in Shareholder Engagement: What We Know and Don't Know |
Received:October 11, 2017 Revised:October 11, 2017 |
Key Words: Shareholder; engagement; corporate governance; agency problem; free-riding |
| Author Name | Affiliation | | SHUPING LI* | Hong Kong Polytechnic University | | Jyun-Ying Trent Fu | National Chengchi University |
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Abstract: |
| Shareholder engagement, defined as shareholders’ participation in a firm’s management and governance, is critical for firm’s sustainability. Understanding the determinants of shareholders engagement is important for both research and practice. We examine the antecedents of share-holder engagement by applying the perspective of free-riding in monitoring. Longitudinal analysis based on 2,542 Chinese public firms from 2004 to 2014 shows that a firm’s shareholder engagement decreases with the number of shareholders in the firm, as a consequence of free-riding among shareholders in monitoring. Moreover, the relationship mainly occurs among small investors rather than between large and small investors. Further, the relationship is stronger when there is a greater threat of shareholders exit from the firm. It is attenuated, how-ever, when a firm is featured by higher monitoring benefits due to various agency problems. The findings provide implications for both corporate governance research and policy reforms. |
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