Do multiple large shareholders matter in financial firms? Evidence from China

Abstract

We examine whether multiple large shareholders (MLS, henceforth) play a relevant role in financial firms like banks. Different from prior studies that document a significant effect of MLS in non-financial firms, we find that MLS have no effect on bank performance. This finding is robust to the propensity-score matching, the Heckman two-step model, the instrumental variable approach, the bank fixed-effect model, an alternative definition of the large shareholder, alternative outcome variables, banks with a transition of ownership structures, and the subsample of public banks. The insignificant impact of MLS is not driven by blockholder identity. Further analyses show that MLS play a governance role only in state banks and banks headquartered in regions with weak legal institutions. The results suggest that the role of MLS is limited in highly regulated sectors like the banking sector.