How Does The Company Scandal Affect The Company's "voting With Hands" And "voting With Feet"?

Corporate scandals are the kind of stimulating transmission of information associated with period of company governance,the occurrence and the impaction of scandals are always randomly.Corporate scandals can form an external impact,causing the internal biochemical of external supervision,regarding to the impact on the internal governance and external investment interests is also greatly different after the occurrence of the scandals.This paper focuses on the procedure of corporate scandals,including the generation,hoarding,disclosure,supervision by media,triggering "voting with feet" by external investors,triggering "voting with feet" by internal investors,and triggering "voting with hands" by internal investors.According theoretical review,case analysis and empirical inspection,this paper analyzes on how corporate scandals to form the external governance’s influence on internal governance,and firstly find out that the signal theory on the corporate reputation is also applicable to the scandals.Not only can external investors identify the short-term value and long-term value of the company in the current period of scandals through the behavior of "voting with their feet",but also the controlling shareholders as the internal investors will significantly reaction regarding scandals.But in practice,the CEOs action is different,whose action should based on the controlling shareholders’ motivations.The Paper also find out that corporate reputation embodies a special governance path in scandals,not only the special spillover effect comparing with media,but also the mandatory disclosure demands.the mandatory disclosure of scandals through the supervision reflects the fair trade rather than the improvement of the invest market efficiency.