Minority shareholders protection and corporate financial leverage: Evidence from a natural experiment in China

Qingzi Cao, Ming Fang and Yuying Pan

Pacific-Basin Finance Journal, 2022, vol. 73, issue C

Abstract: Using the online voting policy in Chinese market as a natural experiment of minority shareholders protection, this paper explores the relationship between minority shareholders protection and corporate financial leverage. The results show that the participation of minority shareholders in online voting of shareholders' meeting can significantly reduce corporate financial leverage. Our results are still valid after a series of robustness tests. In terms of mechanism, we find that minority shareholders participating in the online voting can play a crucial supervisory role on the management, which can improve the level of internal control and reduce the overconfidence of the management. The above monitoring effect can reduce the corporate financial leverage. In addition, our heterogeneity test results show that the impact of online voting on financial leverage is more significant for small capitalization, non-state-owned firms, and firms with relatively low level of external supervision.

Keywords: Minority shareholders; Online voting; Financial leverage; Internal control; Overconfidence (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000373

DOI: 10.1016/j.pacfin.2022.101742

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