Do You Hear the People’s Saying? - The Voice of Individual Investors

In a setting where regulators provide a curated online platform to facilitate management access by individual investors, we examine the “voice” of individual shareholders in their interaction with firm management. We find that the timing and content of online postings directed to management from individual investors are generally responsive to significant corporate events. Besides information acquisition, individual investors sometimes convey criticisms and suggestions to management. Individual investors collectively turn more active in their online engagements with management when there are signs of weaker external monitoring from institutional investors or weaker managerial incentive alignment with shareholders. Individual investors also tend to step up their engagement efforts after their followed firm experiences poor performance. Additionally, we observe increased engagements by individual investors during securities rules violations and these engagements are associated with sooner enforcement actions on the violations. Our findings suggest that, empowered by a conducive regulatory environment, individual investors could manifest active monitoring incentives when the perceived benefits are sufficiently high.