Minority Shareholder Activism and Debt Financing Costs: Evidence from China

Kezhi Liao, Zhihao Wang and Yu Zhang

Emerging Markets Finance and Trade, 2025, vol. 61, issue 10, 2993-3021

Abstract: With the advent of the digital era and the prevalence of social media, minority shareholder activism on online interactive platforms has emerged as a novel form of corporate governance in emerging markets. This paper explores the impact of minority shareholder activism on debt financing costs in China. Using a dataset of 28,827 firm-year observations from 3364 listed firms between 2010 and 2023, we find that minority shareholder activism significantly reduces debt financing costs. Extensive endogeneity and robustness tests suggest causality. Furthermore, we identify improved corporate governance and information environment as economic mechanisms driving this effect. Heterogeneity analyses indicate that state ownership weakens the negative effect of minority shareholder activism on debt financing costs, whereas media coverage and corporate risk-taking degree amplify this effect. Overall, our findings emphasize the potential of minority shareholders to reduce debt financing costs through their engagement in online interactions during the information age.

Date: 2025
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DOI: 10.1080/1540496X.2025.2474147

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