How Do Shareholder Defaults Influence Corporate Governance in DeFi Lending?

We analyze user voting participation in governance on token-based digital platforms and show how this behavior changes under financial stress. Using novel user-proposal-level data from 10 DeFi lending platforms, we find that borrowers (financially exposed users with collateralized positions) engage more actively in governance than passive token holders. Voting activity increases significantly before a potential liquidation, when users have the most at stake, as they try to protect their financial health. After liquidation, voting participation declines significantly. These findings suggests that token-based governance helps mitigate platform-user conflicts but tends to become more short-term driven when linked to active platform use.