Shareholders' Meeting Vs.Board Of Directors:Does Decision-making Conflict Help The Company?

In recent years,more and more companies have experienced the event that the shareholders' meeting overruled the board of directors' major business decisions,such as the shareholder's meeting overruled the board of directors' merger and acquisition,private placement,board of directors change and other bills,which changed the situation that the previous shareholders' meeting was highly consistent with the board of directors' decisions.Does the conflict behavior in the decision-making process between the shareholders' meeting and the board of directors led to the improvement of corporate governance efficiency? Furthermore,does the conflict between the general meeting of shareholders and the board of directors contribute to the long-term development of the company?This paper takes the rejection of board decisions by shareholders' meetings in Shanghai and Shenzhen stock exchanges from 2000 to 2017 as the sample,and through the method of empirical research,discusses how the conflicts between shareholders' meetings and board decisions will affect the company.From the perspective of market reaction,this paper adopts the event research method to calculate the cumulative abnormal returns and buy and hold abnormal returns,and measures the impact of shareholders' meeting's rejection of board decisions on the company.The empirical results show that the short-term market reaction of the shareholders' meeting to veto the decision of the board of directors is negative,and the long-term market reaction is positive.There is a significant negative correlation between the rejection of the right decision of the board of directors in the general meeting of shareholders and short-term earnings,but it will not bring additional losses to the company in the long run.There is a significant positive correlation between the rejection of the wrong decision of the board of directors by the general meeting of shareholders and short-term and long-term earnings.Further study on the impact of the characteristics of the general meeting of shareholders and the board of directors on the effectiveness of the shareholders' meeting to veto the board's motion.The empirical results show that: the higher the shareholding ratio of institutional investors,the larger the size of the board of directors,the higher the proportion of independent directors,and the more frequent the number of meetings of the board of directors,and the stronger positive effect that the shareholders' meeting will bring to the company if it rejects the wrong decisions of the board.Finally,from the perspective of external governance environment,this paper studies the influence of the region where the company is located on the decision-making effectiveness of the veto of the board of directors at the shareholders' meeting.The empirical results show that the positive effect of the shareholders' meeting rejects the board's wrong decision is stronger in the companies in the central and eastern regions than in the western regions.This paper reveals the positive role of the general meeting of shareholders in corporate governance.The conflict decision-making between the general meeting of shareholders and the board of directors indicates that the general meeting,as the internal governance mechanism of the company,is playing its due role,which can improve the efficiency of corporate governance and contribute to the long-term development of the company.Encourage shareholders to change from "voting with feet" to "voting with hands".By actively exercising their voting rights in the general meeting of shareholders,they can influence corporate decisions,change corporate operations and enhance corporate value,so as to protect their own interests.It also reveals the important role of institutional investors and independent directors in corporate governance.