Will Companies Conduct Market Value Management Before Annual General Meetings?

Since the 1993 "Corporation Law" confirmed the legal status of the shareholders meeting as the supreme authority of listed companies,the policies related to the shareholders meeting have been continuously improved.Scholars have conducted extensive empirical research on this issue and proposals in meetings are often voted against by small and medium-sized investors,indicating that shareholders meetings play a governance role.Annual general meetings provide an opportunity for investors to communicate face-to-face with major shareholders and managers.They can directly raise questions or express their dissatisfaction through voting rights.Under such circumstance,the company may conduct market value management in advance in order to reduce the dissatisfaction of dissident shareholders at the meeting.Furthermore,the prominent issue related to China’s principal-agent problem Ⅱ may aggravate the above-mentioned behavior of the company.In this process,can institutional investors play an active supervisory role?This article takes the 2016-2018 Shanghai and Shenzhen Main Board-listed company’s annual general meetings as the research object,and focuses on the company’s market value management behavior before the annual general meetings,as well as the impact of the principal-agent problem Ⅱ and institutional investor shareholding on the company’s above behavior.Adopting empirical research methods,this article has the following findings:First,before the annual general meeting,the company will conduct market value management,and there is a positive excess return;second,the higher the concentration of equity the company has,before the annual general meeting,the more prominent the company’s market value management behavior is,which means that the existence of the principal-agent problem II will aggravate the company’s market value management behavior before the meeting;third,institutional investors will inhibit the company’s market value management behavior before the meeting,that is,the greater the institutional investors holding is,the less prominent the company’s market value management before the meeting is.In particular,when the fund or QFII shareholding ratio is higher,the company’s market value management before the meeting is less prominent,which means that institutional investors have played an active supervisory role.This article then controls the endogenous problems and finds that the above-mentioned conclusions are still robust.In further analysis,this article also found that before the meeting,listed companies mainly conduct market value management through quarterly accrual earnings management and information disclosure management and other information manipulation methods.And the worse the company’s performance in the past year is,the higher the possibility of market value management before meetings is.The research in this article expands the relevant research on annual general meetings on a theoretical level,supporting the important governance role of the annual general meeting and providing ideas on improving related policies about shareholders meetings.