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Multiple large shareholders and corporate investment: Evidence from China

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  • Jiang, Fuxiu
  • Cai, Wenjing
  • Wang, Xue
  • Zhu, Bing

Abstract

This study investigates the governance role of multiple large shareholders (MLS hereafter) in firms' investment decisions. Using a sample of 1640 Chinese firms listed on the Shanghai or Shenzhen stock markets, we compare the investment efficiency of firms having MLS with that of firms having a single large shareholder and find that the presence and power of MLS are associated with significantly higher investment efficiency. The results are robust after we address endogeneity and sample selection concerns. Further tests show that MLS exert governance mainly through “voice.” MLS tend to lower potential overinvestment and increase future investment performance. The impact of MLS on investment efficiency does not vary with a firm's access to resources and is less prominent in firms with stronger governance and less information asymmetry. Our results imply that MLS play a governance role and alleviate a firm's agency costs and information asymmetry manifested in a firm's investment efficiency.

Suggested Citation

  • Jiang, Fuxiu & Cai, Wenjing & Wang, Xue & Zhu, Bing, 2018. "Multiple large shareholders and corporate investment: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 66-83.
    • Handle: RePEc:eee:corfin:v:50:y:2018:i:c:p:66-83
    DOI: 10.1016/j.jcorpfin.2018.02.001
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    More about this item

    Keywords

    Multiple large shareholders; Investment; Monitoring;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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