Enhancing external oversight: The complementary role of regulatory minority shareholders in China

Abstract

In 2014 the China Securities Investor Services Center (CSISC) was set up to serve as a government-backed entity to represent minority shareholders. Does CSISC achieve its role as a complementary external regulator? We present empirical evidence to show that CSISC can effectively alleviate the severity of the minority shareholder expropriation problem. Further, the effect is particularly noticeable in firms that lack measures to prevent misconduct by blockholders, which implies that CSISC significantly complements existing external regulation.