We study how managers react to shareholder empowerment that makes votes on shareholder proposals binding. We empirically exploit staggered legislative changes that introduce such empowerment for proposals regarding majority voting in director elections. We find that managers become more responsive to shareholder requirements by initiating majority voting through either management proposals or governance guidelines. This early action crowds out shareholder proposals. Further results suggest compromised implementation: Managers adopt provisions that give them greater control over the channel of implementation and allow them to retain directors who fail in elections. Our results suggest that managers retain substantial discretion to modulate shareholder requirements. This article was partially completed when Wu was at Fudan University. Any errors are attributable solely to the authors.

In this article, we show that firms can become conservative in innovation when their directors face job insecurity. We find that after the staggered enactment of majority voting legislation that strengthens shareholders’ power in director elections, firms produce fewer patents, particularly exploratory patents, and fewer forward citations. This effect is stronger for directors facing higher dismissal costs or threats and for firms with greater needs for board expertise and is mitigated by institutional investors’ expertise in innovation. Overall, our results suggest that heightened job insecurity induces director myopia, which leads to a reduction in investment in risky, long-term innovation projects.

Using a new trademark-based product market competition measure and a novel trademark-merger data set over the period 1983–2016, we show that companies facing greater product market competition are more likely to be acquirers. We further show that postmerger, compared to their nonacquiring peers, acquirers consolidate their product offerings by discontinuing more existing product lines and developing fewer new product lines. Using a quasi-experiment based on bids withdrawn due to exogenous reasons helps us establish the causal effect of deal completion on product-market consolidation. We conclude that acquisitions create product market synergies by cutting overlapping product offerings to achieve cost efficiency.