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Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China

Year: 2010

Type: article

Abstract: We examine the wealth effects of 3 regulatory changes designed to improve minority-shareholder protection in the Chinese stock markets. Using the value of a firm’s related-party transactions as an inverse proxy for the quality of corporate governance, wefind that firms with weaker governance experienced significantly larger abnormal returns around announcements of the new regulations than did firms with stronger governance. We also find that firms with strong ties to the government did not benefit from the regulations, suggesting that minority shareholders did not expect regulators to enforce the new rules on firms where blockholders have strong political connections.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109010000608

Authors: Henk Berkman, Rebel A. Cole, Lawrence J. Fu

Institutions: University of Auckland, DePaul University, Australia and New Zealand Banking Group

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W2283460118

FWCI: 20.27

Cites: 65

Cited by: 339

Related to: 10