Does the Retail Shareholder-Increasing Strategy Benefit Long-term Management? Evidence of Shareholder Perks Program in Japan

Shareholder perks (SP) are additional benefits provided by companies to strengthen the investor relationship and increase the number of retail shareholders. Using the Japanese listed companies that conducting SP programs, we examine the management intention of retail shareholder-increasing strategy in view of the real earnings management. Our results suggest that the SP program stables the shareholder base by increasing the number of long-term retail shareholders and thus making managers long-term oriented and decreasing real earnings management activities. On the other hand, the SP program changes ownership structure, decreases the efficiency of corporate governance, and therefore induces more real earnings management activities of managers. In general, the effect of the SP program in promoting long-term management is greater than that in aggravating management opportunism. Our results are consistent after a series of robustness tests. Our findings have important implications for understanding the role of retail shareholders in corporate governance