Governance by One-Lot Shares

Feng Cao, Yuhai Xuan, Rongli Yuan and Hong Zou

Journal of Financial and Quantitative Analysis, 2025, vol. 60, issue 2, 874-909

Abstract: We use a novel experiment in China to examine the effects of having a quasi-official investor own a small number of shares on specific firm outcomes. We find that, relative to control firms, pilot firms experience an increase in dissenting votes from independent directors, a reduction in tunneling and earnings management activities, and an improvement in merger performance. Independent directors questioned by the quasi-official shareholder in activism events subsequently lose board seats in the director market. Overall, our results shed light on a new mechanism for enhancing the protection of minority shareholders.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:60:y:2025:i:2:p:874-909_10

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