TITLE:
Voice-Exit Mechanism and Corporate Governance
AUTHORS:
Quan Yuan, Yuhong Li
KEYWORDS:
Voice-Exit Mechanism, Corporate Governance, Balanced Approach
JOURNAL NAME:
Modern Economy,
Vol.14 No.5,
May
29,
2023
ABSTRACT: The voice-exit mechanism is a critical area of research due to its significant
implications for corporate decision-making accountability and transparency. A thorough
understanding of the advantages and disadvantages of this mechanism can lead to
the development of more effective strategies to improve corporate governance and
increase shareholder value. Academic and business literature have thoroughly debated
and analysed the notions of voice and exit mechanisms in corporate governance. Conventional
approaches to corporate governance have
depended on exit mechanisms to hold management accountable for its actions, such as shareholder activism or
selling shares. On the other hand, recent research has emphasised the importance
of voice channels, such as conversations with management and exercising voting rights,
as practical methods of enhancing corporate governance. Additionally, with recent developments in the asset management
industry’s size and organisational structure, where “keeping” and “selling”
stocks are frequently mutually inclusive rather than exclusive, the corporate governance
function of capital markets is now
increasingly through share transactions. Because new realities must be adequately
analysed and included in corporate governance codes of conduct, the single voice
and exit paradigm must be abandoned in such situations in favour of alternative
frameworks that adapt to these realities. The investigation of the voice-exit mechanism
and corporate governance is significant as it
explores the methods through which shareholders can manifest their dissatisfaction
with a company’s performance regarding corporate governance. This paper’s study
background and methodology depend on a literature survey, a comparative analysis
of academic research, and expert opinion on corporate governance procedures. They
conclude with proposals for a more balanced
corporate governance approach that includes both voice and exit alternatives. By enabling stakeholders to
offer helpful input to strengthen corporate governance and foster a more open
and responsible corporate governance culture, a more balanced or complementary
voice, exit mechanisms can aid businesses in making educated decisions and
enhancing performance.