Does Minority Ownership Concentration Influence the Relationship between Board Independence and Tunneling?

29 Pages Posted: 1 Feb 2014

See all articles by Charles P. Cullinan

Charles P. Cullinan

Bryant University

Fangjun Wang

Xi'an Jiaotong University (XJTU)

Wang Peng

Xi'an Jiaotong University (XJTU)

Xi Yu

Xi'an Jiaotong University (XJTU)

Date Written: January 30, 2014

Abstract

Tunneling is a type of expropriation of resources from the minority shareholders of a company by its largest shareholder. Previous research has found mixed results on the relationship between board independence and tunneling, and on the relationship between minority shareholder concentration and tunneling. We examine whether more independent boards may be better at limiting tunneling when there is greater minority shareholder concentration. Using a sample of 3,084 firm-years of Chinese companies, we find a significant interaction between board independence and minority shareholder concentration in a model of tunneling. These results suggest that more independent boards are more likely to inhibit tunneling when minority shareholdings have greater voting influence over board elections through concentration of shareholding.

Keywords: tunneling, board independence, minority shareholders, ownership concentration

Suggested Citation

Cullinan, Charles P. and Wang, Fangjun and Peng, Wang and Yu, Xi, Does Minority Ownership Concentration Influence the Relationship between Board Independence and Tunneling? (January 30, 2014). Available at SSRN: https://ssrn.com/abstract=2388409 or http://dx.doi.org/10.2139/ssrn.2388409

Charles P. Cullinan (Contact Author)

Bryant University ( email )

1150 Douglas Pike
College of Business
Smithfield, RI 02917-1284
United States
401-232-6421 (Phone)
401-232-6319 (Fax)

Fangjun Wang

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Wang Peng

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Xi Yu

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

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