Abstract
Shareholders can voice their opinions primarily by voting in director election. The potential effects of their voting behavior on subsequent board monitoring were examined using data on S&P 500 firms spanning 2003 to 2019. Voting results were found to correlate strongly with a board’s monitoring of upward earnings management. A high percentage of dissenting votes in the election of directors predicts weaker subsequent monitoring, as does a large difference in the number of dissenting votes among the different nominees. These effects are more pronounced when the directors perceive the board’s operation to be unjust and when the directors’ personal characteristics as more similar.
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