Abstract

http://ssrn.com/abstract=1029886
 
 

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Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China


Henk Berkman


University of Auckland - Faculty of Business & Economics

Rebel A. Cole


Driehaus College of Business at DePaul University

Jiang Lawrence Fu


Standard Charter Bank

June 7, 2009

Journal of Financial and Quantitative Analysis (JFQA), Vol. 45, No. 6, pp.1391-1417, 2010
AFA 2009 San Francisco Meetings Paper

Abstract:     
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.

Number of Pages in PDF File: 46

Keywords: China, corporate governance, enforcement, expropriation, political connections, investor

JEL Classification: G32, G34, G38, G12, G15

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Date posted: March 25, 2008 ; Last revised: March 1, 2011

Suggested Citation

Berkman, Henk and Cole, Rebel A. and Fu, Jiang Lawrence, Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China (June 7, 2009). Journal of Financial and Quantitative Analysis (JFQA), Vol. 45, No. 6, pp.1391-1417, 2010; AFA 2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1029886

Contact Information

Henk Berkman
University of Auckland - Faculty of Business & Economics ( email )
Private Bag 92019
Room: 577
Auckland
New Zealand
(64 9) 3737599 Ext. 7181 (Phone)
(64 9) 3737406 (Fax)
Rebel A. Cole (Contact Author)
Driehaus College of Business at DePaul University ( email )
Chicago, IL 60604
United States
1-312-362-6887 (Phone)
HOME PAGE: http://condor.depaul.edu/~rcole
Jiang Lawrence Fu
Standard Charter Bank ( email )
Hong Kong
China
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