Parasites and paragons

Ownershipr reform and concentrated interest among minority shareholders

Nan Jia, Jing Shi, Changyun Wang, Yongxiang Wang

Research output: Contribution to journalArticle

Abstract

Do investors with concentrated shareholding infringe on the value of more‐fragmented shareholders ("parasites") or facilitate the growth of firm value for all shareholders ("paragons")? In a major ownership reform of Chinese listed firms, we obtain evidence which suggests that larger minority shareholders undertook certain actions both for a rent‐seeking purpose—that these actions allowed them to reap private benefits at the expense of smaller minority shareholders, and for a value‐creating purpose—to potentially increase firm value after the reform. It is plausible that both drivers co‐existed, but they generated different implications of wealth redistribution. When institutional constraints on rent‐seeking were ineffective, higher concentration of minority shares decreased the immediate gains captured by the small investors who held minority shares at the time of the reform, but increased the future value of the firm to be divided among for all investors, large and small, who held firm shares after the reform.
Original languageEnglish
Pages (from-to)129-162
Number of pages34
JournalJournal of Management Studies
Volume57
Issue number1
Early online date9 Oct 2019
DOIs
Publication statusPublished - Jan 2020

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Keywords

  • China
  • concentrated interests
  • corporate governance
  • minority shareholders
  • rent-seeking

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