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Firms with short-termism: Evidence from expatriate controlling shareholders

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  • Tan, Xue
  • Yu, Lin
  • Fung, Hung-Gay

Abstract

We use controlling shareholders' emigration data in Chinese non-state-owned enterprises (non-SOEs) listed on stock exchanges in China to investigate the effect of changes in their residency status on firm behavior. Environmental concerns, including low-quality education, medical services, and adverse business conditions for non-SOEs, are important drivers of emigration. These firms engage in short-term investments by holding cash, real estate, and financial assets, targeting short-term earnings growth, and reducing long-term investments, such as corporate social responsibility activities and innovation through R&D and patents. The negative effect of emigration by a controlling shareholder on corporate innovation is weaker for firms with good internal and external corporate governance. Our research highlights the importance of emigration by controlling shareholders in long-term corporate development and offers policy implications for policymakers and investors in emerging markets.

Suggested Citation

  • Tan, Xue & Yu, Lin & Fung, Hung-Gay, 2022. "Firms with short-termism: Evidence from expatriate controlling shareholders," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000658
    DOI: 10.1016/j.pacfin.2022.101770
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