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Governance by One-Lot Shares

Author

Listed:
  • Cao, Feng
  • Xuan, Yuhai
  • Yuan, Rongli
  • Zou, Hong

Abstract

We use a novel experiment in China to examine the effects of having a quasi-official investor own a small number of shares on specific firm outcomes. We find that, relative to control firms, pilot firms experience an increase in dissenting votes from independent directors, a reduction in tunneling and earnings management activities, and an improvement in merger performance. Independent directors questioned by the quasi-official shareholder in activism events subsequently lose board seats in the director market. Overall, our results shed light on a new mechanism for enhancing the protection of minority shareholders.

Suggested Citation

  • Cao, Feng & Xuan, Yuhai & Yuan, Rongli & Zou, Hong, 2025. "Governance by One-Lot Shares," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 60(2), pages 874-909, March.
    • Handle: RePEc:cup:jfinqa:v:60:y:2025:i:2:p:874-909_10
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