Controlling shareholders' influence on acquisition decisions and value creation: An empirical study from China

Evans Opoku‐Mensah and Yuming Yin

International Journal of Finance & Economics, 2023, vol. 28, issue 2, 1965-1980

Abstract: Controlling shareholders are capable of influencing major decisions in firms, and their existence may give rise to principal‐to‐principal conflict as minority shareholders may feel sidelined during decision‐making. This study employs a proxy (the highest control right), which takes into consideration both direct and indirect controls to investigate the excess cash usage preference of controlling shareholders. Again, the study investigates how the background characteristics of different controlling shareholders influence their underlying firms' acquisition decisions. With observations from 13,293 Chinese firms and the random effect probit model, we find that controlling shareholders are more likely to influence the use of excess cash into acquisition activities other than to retain such cash in the firm possibly for the payment of a dividend. Furthermore, we observe that the traditional way of classifying firms into either private or state is misleading, and the use of excess cash is influenced by the unique characteristics of the true owner. We recommend that on‐going reforms in China should consider encouraging more institutional investors to acquire shares as this will reduce the powers of controlling owners.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/ijfe.2520

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:wly:ijfiec:v:28:y:2023:i:2:p:1965-1980

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().