Value creation and value capture in governing shareholder relationships

evidence from a policy experiment in an emerging market

Nan Jia, Jing Shi, Yongxiang Wang

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

Protecting minority shareholders is a central issue in corporate governance. A common tool of empowering minority shareholders is to curb controlling shareholders’ power of expropriating firm value, but this approach was rarely successful because of the resistance from powerful controlling shareholders. We examine an alternative way of empowering minority shareholders without directly fighting with controlling shareholders. A major corporate governance reform in China gave minority shareholders a decision right over certain actions that affected the creation of firm value. We demonstrate that, the greater the extent to which minority shareholders’ actions can influence the firm's value ex‐post, the more value controlling shareholders concede to minority shareholders ex‐ante. This effect becomes even stronger when controlling shareholders are able to expropriate a larger portion of firm value.
Original languageEnglish
Pages (from-to)2466-2488
Number of pages23
JournalStrategic Management Journal
Volume39
Issue number9
Early online date28 Jun 2018
DOIs
Publication statusPublished - Sep 2018

Keywords

  • China
  • empowering minority shareholders
  • principalprincipal conflict
  • value capture or appropriation
  • value creation
  • principal-principal conflict

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