Foreign strategic ownership and minority shareholder protection

Hamish Anderson, Jing Chi and Jing Liao

Emerging Markets Review, 2019, vol. 39, issue C, 34-49

Abstract: We show foreign strategic investors provide monitoring protection, by reducing tunneling through intercorporate loans. Further, foreign strategic investors mitigate minority shareholders expropriation through controlling excessive borrowing, whereas firms without foreign-founders channel excessive borrowing to controlling shareholders using intercorporate loans. The monitoring benefits are greater when corporate governance is weaker, and when foreign strategic investors are from English common law countries. Compared to foreign investor proxies typically used in Chinese studies, we use foreign-founder shareholders. As foreign-founders are long-term investors facing high liquidity risk, they are highly motivated to actively monitor and influence firm behaviours.

Keywords: Foreign strategic investors; Shareholder protection; China (search for similar items in EconPapers)
JEL-codes: G23 G34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:39:y:2019:i:c:p:34-49

DOI: 10.1016/j.ememar.2019.03.005

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