How Do Voting Powers Matter in Equity Finance? Evidence from Chinese Private Placements

Abstract

This study develops a model exploring the relationship between equity financing and voting powers. It shows that in certain ownership structures, newly coming large shareholders can wield considerable influence over voting results. Consequently, existing shareholders may resist their joining, thereby hindering private placements to external investors. To validate this mechanism, this study also conducts an empirical analysis with a dataset of 3598 Chinese listed companies.The empirical results support the prediction of the model.

Keywords: Equity Financing, Private Placements, Voting Powers, Shapley-Shubik Index