Political connections and minority-shareholder protection

Evidence from securities-market regulation in China

Henk Berkman*, Rebel A. Cole, Lawrence J. Fu

*Corresponding author for this work

Research output: Contribution to journalArticle

144 Citations (Scopus)


We examine the wealth effects of 3 regulatory changes designed to improve minority-shareholder protection in the Chinese stock markets. Using the value of a firm's related-party transactions as an inverse proxy for the quality of corporate governance, wefind that firms with weaker governance experienced significantly larger abnormal returns around announcements of the new regulations than did firms with stronger governance. We also find that firms with strong ties to the government did not benefit from the regulations, suggesting that minority shareholders did not expect regulators to enforce the new rules on firms where blockholders have strong political connections.

Original languageEnglish
Pages (from-to)1391-1417
Number of pages27
JournalJournal of Financial and Quantitative Analysis
Issue number6
Publication statusPublished - Dec 2010
Externally publishedYes

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