Corporate governance of weak stakeholders: Minority investors and investment efficiency

Abstract

This study explores the impact of minority shareholders' participation in governance on corporate investment efficiency. The study focuses on the effects of online voting rules in China, utilizing data from firms listed on the Shenzhen Stock Exchange between 2011 to 2017. Employing a quasi-natural experiment with the difference-in-differences model, the results reveal that online voting by minority investors increases corporate investment efficiency. This conclusion is verified using a series of robustness tests and endogeneity adjustments. Furthermore, the findings indicate that the impact of minority investors' online voting is more evident in firms with less internal governance and weaker external monitoring mechanisms. Additionally, minority investor participation in governance increases corporate investment efficiency by increasing information transparency and the quality of internal control. Online voting encourages the organization's management to make more favorable decisions and assure the steady growth of the business.