The Value of Shareholder Activism: New Evidence from the Split-Share Structure Reform in China

Abstract

We examine shareholder activism in the recent split-share structure reform in China. This unique event allows us to avoid the deficiencies in determining activism proxies and in measuring their effectiveness that plague the previous literature. We find that the effectiveness of shareholder activism is influenced by segmented institutional ownerships. Particularly, shareholder activism could have both positive and negative impacts on managerial behaviors in the presence of institutional investors' interest conflicts. We show that, even in its primitive stage, Chinese shareholder activism has demonstrated positive value in corporate governance.