Does Mandating Cumulative Voting Weaken Controlling Shareholders? A Difference-in-differences Approach

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Original languageEnglish
Publication statusPublished - Jun 2017

Conference

TitleConference on Empirical Legal Studies in Asia
LocationAcademia Sinica
PlaceTaiwan
CityTaipei
Period14 - 15 June 2017

Abstract

Corporate scholars have long championed the use of mandatory cumulative voting in developing countries. Yet, in comparison to majority or plurality voting, we know very little about its effectiveness. Taking advantage of an exogenous legal change that occurred in Taiwanese corporate law in December 2011, we use panel data on 829 publicly traded companies from 2001–2015 in a difference-in-differences framework to tease out the effect of cumulative voting. From 2001–2011, cumulative voting was the default rule, and 20 companies opted for majority voting. While directors and supervisors are elected every three years, not all companies change boards in the same year. Fixed-effect panel regression models show that in the 2012 election—about six months after the legal reform—the cumulative voting rule appears to have weakened the controlling shareholders’ control of the companies that had previously opted for majority voting. The controlling shareholders’ control in the 2013 and 2014 elections, however, did not decrease. The take-away lesson is that lawmakers may be justified in mandating cumulative voting, but in terms of reducing board representation of controlling shareholders, the voting rule does not appear to have a long-term effect.

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Citation Format(s)

Does Mandating Cumulative Voting Weaken Controlling Shareholders? A Difference-in-differences Approach. / LIN, Yu-Hsin; Chang, Yun-chien.

2017. Paper presented at Conference on Empirical Legal Studies in Asia, Taipei, Taiwan.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review