Expropriation of Minority Shareholders in Politically Connected Firms

37 Pages Posted: 4 Dec 2010 Last revised: 15 Feb 2011

Meijun Qian

Australian National University (ANU) - College of Business and Economics

Hongbo Pan

Wuhan University

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: November 10, 2010

Abstract

The conflict of interests between controlling and minority shareholders is an important issue in firms with concentrated ownership. We document that the controlling shareholders’ expropriation behavior through tunneling or self-dealing is much severer in politically connected firms. The results are not due to firms with high tendency of expropriation establishing connection for protection, but because of a less concern of capital market punishment. We show that expropriation is severer only in firms whose political connection secures bank loan access. These findings are consistent with the view that the firms’ financing condition is an important dimension that influences corporate governance.

Keywords: ownership concentration, expropriation, political connection, external financing

JEL Classification: G32, G34

Suggested Citation

Qian, Meijun and Pan, Hongbo and Yeung, Bernard Yin, Expropriation of Minority Shareholders in Politically Connected Firms (November 10, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1719335 or http://dx.doi.org/10.2139/ssrn.1719335

Meijun Qian (Contact Author)

Australian National University (ANU) - College of Business and Economics ( email )

Canberra
Australia

Hongbo Pan

Wuhan University ( email )

Wuhan
China

Bernard Yin Yeung

National University of Singapore - Business School ( email )

1 Business Link
Biz 2 Building Level 6
Singapore 117592
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

Paper statistics

Downloads
508
Rank
43,305
Abstract Views
2,406