Abstract
Key points: - This article examines the mechanisms available to institutional investors in China, especially Qualified Foreign Institutional Investors (QFIIs), that may allow them to engage in activism in publicly traded corporations. - The presumption behind China’s QFIIs policy is that foreign institutional investors will engage in activism and improve the corporate governance of Chinese listed companies. - The article explores the mechanisms available to QFIIs and identifies the extent to which they have the capacity or potential capacity to engage in shareholder activism. - The article concludes that QFIIs could potentially form shareholder consortia. However, based on Shapley-Shubik and Banzhaf-Coleman indices which measure QFIIs’ voting power, it further concludes that QFIIs do not have the capacity or even the potential capacity to form shareholder consortia with sufficient weight to engage in activism.
Highlights
Institutional investors may engage in shareholder activism in response to corporate governance in publicly traded corporations
Based on Shapley–Shubik and Banzhaf–Coleman indices which measure Qualified Foreign Institutional Investors (QFIIs)’ voting power, it further concludes that QFIIs do not have the capacity or even the potential capacity to form shareholder consortia with sufficient weight to engage in activism
Institutional activism may improve corporate governance and the mechanisms that can be used by institutional investors are of great importance in enabling them to execute activism
Summary
This article examines the mechanisms available to institutional investors in China, especially Qualified Foreign Institutional Investors (QFIIs), which may allow them to engage in activism in publicly traded corporations. The presumption behind China’s QFIIs policy is that foreign institutional investors will engage in activism and improve the corporate governance of Chinese listed companies. The article explores the mechanisms available to QFIIs and identifies the extent to which they have the capacity or potential capacity to engage in shareholder activism. The article concludes that QFIIs could potentially form shareholder consortia. Based on Shapley–Shubik and Banzhaf–Coleman indices which measure QFIIs’ voting power, it further concludes that QFIIs do not have the capacity or even the potential capacity to form shareholder consortia with sufficient weight to engage in activism
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