Can Independent Directors Restrain Controlling Shareholders from Tunneling ——Evidence from Board Voting

The unique data of board voting results on management proposals is used to examine the impacts of independent directors on the tunneling of control shareholders. It is found that due to the loss of the independent directors' reputation incurred from the shareholders' tunneling of a listed company and the worse still legal risks, the independent directors, for the sake of maintaining their reputation and decreasing legal risks, will have to say no to the tunneling acts of the shareholders in some degree. One of effective ways is to voice their dissent to the board proposals, or simply disseminate expert information among the medium and small investors so as to boost their alertness on company acts and discern the shareholders' tunneling acts and thus to restrain their motives of tunneling and thus to protect the small and medium shareholders' interests.