Reputation Concerns of Independent Directors: Evidence from Individual Director Voting

Jiang, Wei; Wan, Hualin; Zhao, Shan

doi:10.2139/ssrn.2023146

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Reputation Concerns of Independent Directors: Evidence from Individual Director Voting

Review of Financial Studies, Forthcoming

59 Pages Posted: 16 Mar 2012 Last revised: 5 Dec 2015

See all articles by Wei Jiang

Wei Jiang

Emory University Goizueta Business School; ECGI; NBER

Shan Zhao

City University of Hong Kong (CityU); European Corporate Governance Institute

Date Written: July 1, 2012

Abstract

Using a unique dataset of board proposal voting by individual 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’ propensity to confront management. Younger directors and directors in their second (and last) terms, who have stronger outside career concerns, are more likely to be aligned with investors rather than the managers. Directors with higher reputation stocks (measured by mentions in news articles and the number of board seats) are also more likely to dissent. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities and the avoidance of regulatory sanctions. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher reputation.

Keywords: Independent directors, director voting, career concerns

JEL Classification: G34, L25

Suggested Citation: Suggested Citation

Jiang, Wei and Wan, Hualin and Zhao, Shan, Reputation Concerns of Independent Directors: Evidence from Individual Director Voting (July 1, 2012). Review of Financial Studies, Forthcoming , Available at SSRN: https://ssrn.com/abstract=2023146 or http://dx.doi.org/10.2139/ssrn.2023146