Majority-of-the-minority shareholder votes and investment efficiency

Ning Cao, Paul B. McGuinness and Chao Xi

Journal of Corporate Finance, 2024, vol. 89, issue C

Abstract: In an environment where concentrated share ownership is the norm, we ask whether Majority-of-the-Minority (MoM) votes curb controlling shareholder overreach and investment inefficiency. We consider MoM votes on controller-based related party transactions in China. Such votes give minority parties potential veto power. We report strong association between shareholder disapprovals on controller-based investment related MoM proposals and the underlying entity's investment plans. This association is robust to a battery of tests, including assessment of pre-vote consultation between minority and controlling shareholders and an exogenous regulatory shock. We also report increased likelihood of informal securities enforcements in the year following MoM shareholder disapproval.

Keywords: Minority shareholders; MoM votes; Related party transactions (RPTs); Investment efficiency; Over-investment; Under-investment; China (search for similar items in EconPapers)
JEL-codes: G18 G30 G32 K2 M4 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119924001184
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:89:y:2024:i:c:s0929119924001184

DOI: 10.1016/j.jcorpfin.2024.102656

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().