Berkman, Henk and Cole, Rebel and Fu, Lawrence (2010): Political connections and minority-shareholder protection: Evidence from securities-market regulation in China. Published in: Journal of Financial and Quantiative Analysis , Vol. 6, No. 45 (1. December 2010): pp. 1391-1417.
Download (259kB) | Preview
We examine the wealth effects of three regulatory changes designed to improve minority-shareholder protection in the Chinese stock markets. Using the value of a firm’s related-party transactions as an inverse proxy for the quality of corporate governance, we find that firms with weaker governance experienced significantly larger abnormal returns around announcements of the new regulations than did firms with stronger governance. This evidence indicates that securities-market regulation can be effective in protecting minority shareholders from expropriation in a country with weak judicial enforcement. We also find that firms with strong ties to the government did not benefit from the new regulations, suggesting that minority shareholders did not expect regulators to enforce the new rules on firms where block holders have strong political connections
|Item Type:||MPRA Paper|
|Original Title:||Political connections and minority-shareholder protection: Evidence from securities-market regulation in China|
|Keywords:||China; convergence; enforcement; expropriation; political connections; investor protection; minority shareholder; regulation; tunneling|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
|Depositing User:||Prof. Rebel Cole|
|Date Deposited:||22. Mar 2011 13:52|
|Last Modified:||15. Feb 2013 10:20|
Allen, F., Qian, J., Qian, M. 2005. Law, finance and economic growth in China. Journal of Financial Economics 77, 57-116.
Bennedsen, M., Wolfenzon, D. 2000. The balance of power in closely held corporations. Journal of Financial Economics 58, 113-139.
Berkman, H., Cole, R., Fu, J. 2007. Improving corporate governance where the State is the controlling block holder: Evidence from China. SSRN Working Paper available at http://ssrn.com/abstract=1020170.
Berkman, H., Cole, R., Fu, J. 2009. Expropriation through loan guarantees to related parties: Evidence from China. Journal of Banking & Finance 33, 141-156.
Berle, A., and Means, G. “The Modern Corporation and Private Property.” MacMillan, New York, NY, (1932).
Bertrand, M., Mehta, P., Mullainathan, S. 2002. Ferreting out tunneling: An application to Indian Business Groups. Quarterly Journal of Economics 117, 121-148.
Black, B. “Does corporate governance matter? A crude test using Russian Data.” University of Pennsylvania Law Review, 149 (1999), 2131-2150.
Chandra, R., Balachandran, B. V. 1990. A synthesis for alternative testing procedures for event studies, Contemporary Accounting Research, Spring, 611-640.
Chen, G., Firth, M., Gao, and N. Rui, O. “Ownership structure, corporate governance, and fraud: Evidence from China.” Journal of Corporate Finance, 12 (2006), 424-448.
Chen, G., Firth, M., Gao, and N., Rui, O. “Is China’s securities regulatory agency a toothless tiger?” Journal of Accounting and Public Policy, 6 (2005), 451-488.
Chen, G., Firth, M., and Xu, L. “Does the type of ownership control matter? Evidence form China’s listed companies.” Journal of Banking & Finance, 33 (2009), 171-181.
Cheung, Y., Rau, R., and Stouraitis, A. “Tunneling, propping and expropriation: Evidence from connected party transactions in Hong Kong. Journal of Financial Economics 82, 343-386
Cheung, Y., Jin, L., Rau, R., Stouraitis, A. 2007. How does the grabbing hand grab? Tunneling assets from Chinese listed companies to the state. City University of Hong Kong working paper available at http://ssrn.com/abstract=673283.
Chhaochharia, V., and Grinstein, Y. “Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules.” Journal of Finance, 62 (2007), 1789–1825.
Claessens, S., Djankov, S., Lang, L. 2000. The separation of ownership and control in East Asian Corporations. Journal of Financial Economics 58, 81-112.
Claessens, S., Djankov, S., Fan, J., Lang, L. 2002. Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance 57, 2741-2771.
Cull, R., Xu. L. 2005. Institutions, ownership and finance: The determinants of profit reinvestment among Chinese firms. Journal of Financial Economics 77, 117-146.
Delios, A. “NUS Business School's Database of Chinese Listed Firms’ Ownership Structures.” (2006), National University of Singapore mimeo.
Delios, A., Wu, Z., Zhou, N. 2006. A new perspective on ownership identities in China's listed companies. Management and Organization Review 2, 319–343
Denis, D., McConnell, J. 2003. International corporate governance. Journal of Financial and Quantitative Analysis 38, 1-36.
Djankov, S., Murrell, P. 2002. Enterprise restructuring in transition: A quantitative survey. Journal of Economic Literature 40, 739– 792.
Faccio, M., Masulis, R., McConnell, J. 2006. Political connections and corporate bailouts. The Journal of Finance 61, 2597-2635.
Fan, J., Wong, T.J., Zhang, T. 2005. The emergence of corporation pyramids in China. Chinese University of Hong Kong working paper.
Fan, J., Wong, T.J., Zhang, T. 2007. Politically connected CEOs, corporate governance, and Post-IPO performance of China’s newly partially privatized firms. Journal of Financial Economics 84, 330-357.
Firth, M., Fung, P., and Rui, O. 2006. Corporate Governance and CEO Compensation in China. Journal of Corporate Finance 12, 693-714.
Fisman, R. “Estimating the value of political connections.” American Economic Review, 91 (2001), 1095-1102.
Glaeser, E., Johnson, S., Shleifer, A. 2001. Coase versus Coasians. Quarterly Journal of Economics 116, 853-899.
Holderness, C. 2008. The myth of dispersed ownership at U.S. Firms. Review of Financial Studies, forthcoming.
Jensen, M., Meckling, W. 1976. Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 3, 305–360.
Joh, S. 2003. Corporate governance and firm profitability: Evidence from Korea before the crisis. Journal of Financial Economics 68, 287-322.
Johnson, S., La Porta, F., Shleifer, A., Vishny, R. 2000. Tunneling. American Economic Review 90, 22-27.
Jones, S., Megginson, W., Nash, R., Netter, J. 1999. Share issue privatizations as financial means to political and economic ends. Journal of Financial Economics 53, 217-253.
Klapper, L., Love, I. 2003. Corporate governance, investor protection and performance in emerging markets. Journal of Corporate Finance 195, 1-26.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R. 1998. Law and finance. Journal of Political Economy 106, 1113–1155.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A., Vishny, R. 1999. Corporate ownership around the world. The Journal of Finance 54, 471-517.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A., Vishny, R. 2000. Investor protection and corporate governance. Journal of Financial Economics 58, 3-27.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R. 2002. Investor protection and corporate valuation. The Journal of Finance 58, 1147-1170.
La Porta, R., Lopez-de-Silanes, F., Zamarripa, G. 2003, Related lending, Quarterly Journal of Economics, 119, 231-268.
Lins, K. 2003. Equity ownership and firm value in emerging markets. Journal of Financial and Quantitative Analysis 38, 159-184.
MacNeil, I. 2002. Adaptation and convergence in corporate governance: The case of Chinese listed companies. Journal of Corporate Law Studies 2, issue 2.
Mei, J., Scheinkman, J., Xiong, W. 2004. Speculative trading and stock prices: An analysis of Chinese A-B share premia. Available at http://ssrn.com/abstract=498024.
Sefcik, S.E., Thompson, R. 1986. An approach to statistical inference in cross-sectional models with security abnormal returns as dependent variable. Journal of Accounting Research, 316-334.
Shleifer, A., Vishny, R. 1997. A survey of corporate governance. Journal of Finance 52, 737–783.
Sun, Q., Tong, W. 2003. China share issue privatization: The extent of its success. Journal of Financial Economics 70, 183-222.
Wei, Z., Xie, F., Zhang, S. 2005. Ownership structure and firm value in China’s privatized firms 1991-2001. Journal of Financial and Quantitative Analysis 40, 87-108.
World Bank, 2002. Corporate Governance and Enterprise Reform in China: Building the Institutions of Modern Markets. (main authors: Stoyan Tenev, Chunlin Zhang and Loup Brevort). The World Bank and International Finance Corporation, Washington.
Xu, X. N., Wang, Y. 1999. Ownership structure and corporate governance in Chinese stock companies. China Economic Review 10, 75-98.
Zhu, S. 2000. Securities Regulation in China. (Simmonds & Hill Publishing Ltd.).
Available Versions of this Item
Political connections and minority-shareholder protection: Evidence from securities-market regulation in China. (deposited 04. Apr 2008 06:25)
- Political connections and minority-shareholder protection: Evidence from securities-market regulation in China. (deposited 22. Mar 2011 13:52) [Currently Displayed]