Work

Controlling shareholders, venture capital and expropriation in private placements

Year: 2025

Type: article

Abstract: This paper investigates the expropriation of minority shareholders in private placements (PPs) conducted by Chinese listed companies and explores the monitoring role of venture capitals (VCs) in mitigating the expropriation. Our empirical analysis reveals that controlling shareholders engage in various opportunistic behaviors around PPs to expropriate value from minority shareholders . Furthermore, we find that the involvement of VCs in listed companies significantly reduces these opportunistic behaviors through improving the information disclosure quality and enhancing the board supervision. Additionally, our further analysis indicates that VC's monitoring effect is particularly pronounced in enterprises with non-government background VC, higher reputation VC and VC syndicate. Our findings suggest that informal interactions between VCs and controlling shareholders may complement formal corporate governance structures, thereby offering additional protection for minority shareholders.

Source: Pacific-Basin Finance Journal

DOI: 10.1016/j.pacfin.2025.102775

Authors: Jiangtao Bai, He Song, Shan Wan, Mingxuan Zhang

Institutions: Shanghai Maritime University, Shanghai University of International Business and Economics, Shanghai University of Finance and Economics

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,090