Can multiple blockholders restrain corporate financialization?

Using a large sample of Chinese listed firms from 2003 to 2018, we examine the effect of multiple blockholders on corporate financialization. We find that the existence of other large shareholders significantly restrains corporate financialization, and this finding is robust after addressing endogeneity concerns. Mechanism analyses show the effect is stronger when the relative power of other blockholders is stronger, when the agency conflicts are stronger, and when other corporate governance mechanism is weaker, supporting the monitoring role of other blockholders on the controlling shareholder. Further, we find that corporate financialization does suppress firms' real investment, increase firms' total risk and deteriorate firm performance, and that multiple blockholders help alleviate such negative effects, suggesting the real effect of multiple blockholders' monitoring on corporate financialization. Finally, we decompose financial assets and find other large shareholders mainly restrain the types of financial investment through which controlling shareholders are most likely to expropriate private benefits.