The Law and Practice of Shareholder Inspection Rights: A Comparative Analysis of China and the U.S.

Abstract

Shareholder inspection rights allow a shareholder to access the relevant documents of the company in which they hold an interest, so as to address the problem of information asymmetry and reduce the agency costs inherent in the corporate structure. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, this paper shows that shareholder inspection rights play an important role in both China and the U.S.. On the books, while shareholder inspection rights in both countries are broadly similar, there are some important differences on such issues as the proper purpose requirement. Our empirical analysis further sheds light on how inspection rights operate on the ground. We find that many inspection cases are filed in both China and in Delaware. These cases are resolved by the courts relatively quickly. While inspection rights in both countries are frequently used as a pre-suit discovery device, the types of subsequent litigation that can be filed in each country are quite different. Efforts are made to explain, and draw implications from, the similarities and differences on shareholder inspection rights between the two countries.