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Non-Controlling Shareholders and Innovation: Evidence from Chinese State-Owned Enterprises

Author

Listed:
  • Dan Huang
  • Dong Lu
  • Xiaofeng Quan
  • Cunyu Xing

Abstract

We examine the effect of non-controlling shareholders (NCSs) on innovation in Chinese state-owned enterprises (SOEs). Using a sample of Chinese SOEs during 2007–2016, we find that the voting rights of NCSs positively relate to SOEs’ innovation. Furthermore, we distinguish the identities of NCSs in terms of state-owned attributes and show that this positive relationship is concentrated in SOEs whose NCSs are state-owned. Additionally, we find that the effect of NCSs is more pronounced in financially constrained SOEs, and that SOEs with influential NCSs reduce inefficient investments while make more R&D investments. Overall, our results indicate that influential NCSs have a positive effect on SOEs’ innovation through retaining more resources for innovation projects, and this effect varies somewhat depending on the state-owned attributes of NCSs.

Suggested Citation

  • Dan Huang & Dong Lu & Xiaofeng Quan & Cunyu Xing, 2023. "Non-Controlling Shareholders and Innovation: Evidence from Chinese State-Owned Enterprises," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(1), pages 39-59, January.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:1:p:39-59
    DOI: 10.1080/1540496X.2022.2090833
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