Multiple large shareholders and controlling shareholders' over-appointing of directors

Using manually collected data on directors appointed by controlling shareholders, we find a positive association between the presence of multiple large shareholders (MLS) and controlling shareholders over-appointing of directors. We then provide evidence to show that the purpose of controlling shareholders to over-appoint directors in firms with MLS is to gain the advantage of control contests and resist monitoring by other large shareholders. Furthermore, our results indicate that foreign shareholders are more likely to compete for control with local controlling shareholders and to monitor them, leading to controlling shareholders over-appoint more directors. We also document that the relationship between MLS and controlling shareholders' over- appointing of directors is less pronounced in firms with longer director tenure, a separate nomination committee and foreign directors.