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Parasites and Paragons: Ownership Reform and Concentrated Interest among Minority Shareholders

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  • Nan Jia
  • Jing Shi
  • Changyun Wang
  • Yongxiang Wang

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.

Suggested Citation

  • Nan Jia & Jing Shi & Changyun Wang & Yongxiang Wang, 2020. "Parasites and Paragons: Ownership Reform and Concentrated Interest among Minority Shareholders," Journal of Management Studies, Wiley Blackwell, vol. 57(1), pages 129-162, January.
  • Handle: RePEc:bla:jomstd:v:57:y:2020:i:1:p:129-162
    DOI: 10.1111/joms.12537
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    Cited by:

    1. Wang, Congcong & Wang, Chong & Long, Huaigang & Zaremba, Adam & Zhou, Wenyu, 2024. "Green bond credit spreads and bank loans in China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    2. Jerry Cao & Robert Faff & Jing He & Yong Li, 2022. "Who's Greenwashing Via the Media and What are the Consequences? Evidence From China," Abacus, Accounting Foundation, University of Sydney, vol. 58(4), pages 759-786, December.
    3. Jinghua Tang & Qigui Liu, 2022. "Internal capital allocation in IPOs and corporate innovation: The moderating role of political connections," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4663-4693, December.
    4. Li, Zhe & Wang, Bo & Wu, Tianlong & Zhou, Dan, 2021. "The influence of qualified foreign institutional investors on internal control quality: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    5. Jerry Cao & Yong Li & Xiaojuan Liu & William L. Megginson, 2024. "Foreign institutional investors’ certification and domestic minority shareholders’ mistrust," Financial Management, Financial Management Association International, vol. 53(2), pages 267-289, June.

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