Work

Minority Shareholders' Control Rights and the Quality of Corporate Decisions in Weak Investor Protection Countries: A Natural Experiment from China

Year: 2013

Type: article

Abstract: ABSTRACT Using a 2004 Chinese securities regulation that requires equity offering proposals to obtain the separate approval of voting minority shareholders, we examine whether giving minority shareholders increased control over corporate decisions helps to reduce value-decreasing corporate decisions for firms domiciled in weak investor protection countries. We find that the regulation deters management from submitting value-decreasing equity offering proposals in firms with higher mutual fund ownership. There is also weak evidence that minority shareholders are more likely to veto value-decreasing equity offering proposals in firms with higher mutual fund ownership in the post-regulation period. Overall, our evidence suggests that in weak investor protection countries, the effect of granting minority shareholders increased control over corporate decisions on the quality of corporate decisions depends on the composition of minority shareholders. JEL Classifications: G32; G34; G38

Source: The Accounting Review

DOI: 10.2308/accr-50424

Authors: Zhihong Chen, Bin Ke, Zhifeng Yang

Institutions: City University of Hong Kong, Hong Kong University of Science and Technology, National University of Singapore, Nanyang Technological University, Stony Brook University

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: bronze

OpenAlex ID: W3121824869