Reputation Concerns of Independent Directors
Reputation Concerns of Independent Directors: Evidence from Individual Director Voting1
Wei Jiang2 Columbia Business School
Hualin Wan3 Shanghai Lixin University of Commerce
Shan Zhao4 Shanghai University of Finance and Economics
This Draft: July 2012 1 The authors benefit from discussions with seminar and conference participants at ESCP Europe, EM Lyon, Grenoble School of Management, Reims Management School, the 2012 Asian Finance Association Meeting. 2 Send correspondence to Wei Jiang, Columbia Business School, 3022 Broadway, Uris Hall 803, New York, NY 10027; telephone: (212) 854-9002; e-mail: wj2006@columbia.edu. 3School of Accounting and Finance, Shanghai Lixin University of Commerce, No. 2800, Wenxiang Road, Songjiang University City, Shanghai, 201620; telephone: (+86) 021-67705231; e-mail: wanhualin@lixin.edu.cn. 4 School of Economics, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai, 200433, China; telephone: (+86) 021-65903214; e-mail: zhao.shan@mail.shufe.edu.cn or zhsh333@yahoo.com. 1
Reputation Concerns of Independent Directors: Evidence from Individual Director Voting
ABSTRACT Using a director-level dataset of board proposal voting by independent directors of public companies in China from 2004 to 2009, we analyze the effects of career concerns and current reputation stock on independent directors in their voting behavior. Younger directors and directors in their second (and last) terms, who have stronger career concerns, are more likely to be aligned with investors rather than the managers. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities. Directors with higher reputation stocks (measured by positive news media mentioning) are also more likely to dissent. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher
Wei Jiang2 Columbia Business School
Hualin Wan3 Shanghai Lixin University of Commerce
Shan Zhao4 Shanghai University of Finance and Economics
This Draft: July 2012 1 The authors benefit from discussions with seminar and conference participants at ESCP Europe, EM Lyon, Grenoble School of Management, Reims Management School, the 2012 Asian Finance Association Meeting. 2 Send correspondence to Wei Jiang, Columbia Business School, 3022 Broadway, Uris Hall 803, New York, NY 10027; telephone: (212) 854-9002; e-mail: wj2006@columbia.edu. 3School of Accounting and Finance, Shanghai Lixin University of Commerce, No. 2800, Wenxiang Road, Songjiang University City, Shanghai, 201620; telephone: (+86) 021-67705231; e-mail: wanhualin@lixin.edu.cn. 4 School of Economics, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai, 200433, China; telephone: (+86) 021-65903214; e-mail: zhao.shan@mail.shufe.edu.cn or zhsh333@yahoo.com. 1
Reputation Concerns of Independent Directors: Evidence from Individual Director Voting
ABSTRACT Using a director-level dataset of board proposal voting by independent directors of public companies in China from 2004 to 2009, we analyze the effects of career concerns and current reputation stock on independent directors in their voting behavior. Younger directors and directors in their second (and last) terms, who have stronger career concerns, are more likely to be aligned with investors rather than the managers. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities. Directors with higher reputation stocks (measured by positive news media mentioning) are also more likely to dissent. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher
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