Parasites and Paragons: Ownership Reform and Concentrated Interest Among Minority Shareholders

34 Pages Posted: 29 May 2020

See all articles by Nan Jia

Nan Jia

University of Southern California - Marshall School of Business

Jing Shi

Shandong University of Finance and Economics

Changyun Wang

Renmin University of China

Yongxiang Wang

University of Southern California - Marshall School of Business

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Date Written: January 2020

Abstract

Do investors with concentrated shareholding infringe on the value of more‐fragmented shareholders (‘parasites’) or facilitate the growth of firm value for all shareholders (‘paragons’)? In a major ownership reform of Chinese listed firms, we obtain evidence which suggests that larger minority shareholders undertook certain actions both for a rent‐seeking purpose – that these actions allowed them to reap private benefits at the expense of smaller minority shareholders, and for a value‐creating purpose – to potentially increase firm value after the reform. It is plausible that both drivers co‐existed, but they generated different implications of wealth redistribution. When institutional constraints on rent‐seeking were ineffective, higher concentration of minority shares decreased the immediate gains captured by the small investors who held minority shares at the time of the reform, but increased the future value of the firm to be divided among for all investors, large and small, who held firm shares after the reform.

Keywords: China, concentrated interests, corporate governance, minority shareholders, rent‐seeking

Suggested Citation

Jia, Nan and Shi, Jing and Wang, Changyun and Wang, Yongxiang, Parasites and Paragons: Ownership Reform and Concentrated Interest Among Minority Shareholders (January 2020). Journal of Management Studies, Vol. 57, Issue 1, pp. 129-162, 2020, Available at SSRN: https://ssrn.com/abstract=3610276 or http://dx.doi.org/10.1111/joms.12537

Nan Jia (Contact Author)

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

701 Exposition Blvd
Los Angeles, CA 90089
United States

Jing Shi

Shandong University of Finance and Economics

Erhuan East Road 7366
Jinan, Shandong 250014
China

Changyun Wang

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Yongxiang Wang

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

701 Exposition Blvd
Los Angeles, CA 90089
United States

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