Corporate governance of controlling shareholders and labor employment decisions: Evidence from a parent board reform in China

Rui Fan, Jianping Pan, Minggui Yu and Hao Gao

Economic Modelling, 2022, vol. 108, issue C

Abstract: Controlling shareholders commonly expropriate minority shareholders in state-owned enterprises (SOEs) with concentrated ownership. To curb such behavior, studies have focused on the role of internal corporate governance structures and largely ignored the governance structure in relation to the controlling shareholders. Using a board reform that altered the governance of controlling shareholders in Chinese central SOEs between 2003 and 2019, we show that enhancing the controlling shareholders' corporate governance significantly reduces firms’ overinvestment in employees. We demonstrate that strengthening the monitoring of management is the most likely underlying channel for this association. Our findings indicate that governance enhancement of controlling shareholders mitigates human capital misallocation in SOEs, suggesting that reforming the governance structure of controlling shareholders is effective in enhancing SOE efficiency.

Keywords: Board reform; Controlling shareholder; Outside director; Labor investment efficiency (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999321003424

DOI: 10.1016/j.econmod.2021.105753

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