In the context of digital innovation bottleneck and the double principal-agent problem, non-controlling shareholders break through the control rights bottleneck and weaken the insiders' advantage by over-appointment of directors, becoming a key governance mechanism to drive corporate digital innovation. The purpose of this study is to explore the governance effect, internal mechanisms and contextual heterogeneity of non-controlling blockholders' over-appointment of directors on corporate digital innovation.
Using the sample of Chinese A-share listed companies from 2009 to 2023, this study constructs a comprehensive framework and first examines the impact of over-appointment of directors by non-controlling blockholders on corporate digital innovation. Second, this study investigates its internal mechanisms from four aspects including differentiation strategies, digital transformation, managerial compensation incentives and environmental, social and governance (ESG) media reputation. Third, this study analyses its contextual heterogeneity from the perspective of external institutional supply including the industrial and financial cooperation policy, the artificial intelligence policy, and the AH cross-listing system.
First, the results show that over-appointment of directors by non-controlling blockholders can significantly promote corporate digital innovation, thus exerting positive governance effects. Second, this positive governance effect is specifically realized through four channels: strengthening differentiation strategies, deepening digital transformation, optimizing managerial compensation incentives and enhancing ESG media reputation. Third, when the supply of the industrial and financial cooperation policy, the artificial intelligence policy and the cross-listing system is insufficient, over-appointment of directors can serve as a beneficial supplement to promote corporate digital innovation.
This study expands the research boundaries of non-controlling shareholders' governance, provides theoretical support for the arrangement of over-appointment of directors to drive digital innovation and further contributes local solutions and policy insights to improve corporate governance and further promote China's digital economic development.
