Value Creation and Value Capture in Governing Shareholder Relationships: Evidence from a Policy Experiment in an Emerging Market

Strategic Management Journal, Forthcoming

42 Pages Posted: 5 Nov 2012 Last revised: 24 May 2018

See all articles by Nan Jia

Nan Jia

University of Southern California - Marshall School of Business

Jing Shi

Macquarie University

Yongxiang Wang

University of Southern California - Marshall School of Business

Date Written: May 21, 2018

Abstract

Protecting minority shareholders is a central issue in corporate governance. A common tool of empowering minority shareholders is to curb controlling shareholders’ power of expropriating firm value, but this approach was rarely successful because of the resistance from powerful controlling shareholders. We examine an alternative way of empowering minority shareholders without directly fighting with controlling shareholders. A major corporate governance reform in China gave minority shareholders a decision right over certain actions that affected the creation of firm value. We demonstrate that, the greater the extent to which minority shareholders’ actions can influence the firm’s value ex-post, the more value controlling shareholders concede to minority shareholders ex-ante. This effect becomes even stronger when controlling shareholders are able to expropriate a larger portion of firm value.

Keywords: Value Creation, Value Capture or Appropriation, Corporate Governance, Principal-Principal Conflict, Shareholder Relations, Emerging Markets

JEL Classification: L10, G30

Suggested Citation

Jia, Nan and Shi, Jing and Wang, Yongxiang, Value Creation and Value Capture in Governing Shareholder Relationships: Evidence from a Policy Experiment in an Emerging Market (May 21, 2018). Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2171355 or http://dx.doi.org/10.2139/ssrn.2171355

Nan Jia (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Jing Shi

Macquarie University ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
Australia

HOME PAGE: http://https://researchers.mq.edu.au/en/persons/jing-shi

Yongxiang Wang

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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