Protection Of Minority Shareholders Research Articles

Can a not-for-profit minority institutional investor affect corporate tax avoidance? Evidence from China

ABSTRACT We investigate the impact of the China Securities Investor Service Center (CSISC), a not-for-profit minority institutional investor, on corporate tax avoidance. Employing a difference-in-differences (DID) model based on a sample of Chinese listed companies during 2014–2017, we find that CSISC shareholding reduces corporate tax avoidance. We check this finding’s robustness using alternative measures of tax avoidance, alternative sampling, placebo tests, and parallel trend analysis, and our results still hold. In addition, we find the CSISC’s negative impact on corporate tax avoidance is more pronounced in state-owned enterprises (SOEs), firms with worse internal and external corporate governance, and regions with stricter tax enforcement. Further analyses reveal that the improved information environment is a potential channel through which the CSISC inhibits corporate tax avoidance. This paper enriches the literature on the impact of minority shareholder protection mechanism and the determinants of corporate tax avoidance.

Reforming private securities litigation in China: Does private enforcement by minority shareholders matter to corporate fraud?

Leveraging the pilot initiative on the diversified resolution mechanism for private securities litigation in China, our study explores the impact of private securities litigation by minority shareholders on corporate fraud. Employing a difference-in-differences analysis over the period 2010–2018, we observe a substantial reduction of 16.4 % in corporate fraud. This effect is particularly pronounced in companies with political connections and those characterized by weaker internal governance structures. Further analysis indicates a diminishing gap in corporate fraud between pilot and non-pilot firms after the nationwide expansion of the pilot program. These findings carry significant policy implications, particularly for emerging markets seeking to enhance protection for minority shareholders.

Do minority shareholder protection laws benefit investors? Evidence from a natural experiment on cross-listed firms

Do minority shareholder protection laws benefit investors? Evidence from a natural experiment on cross-listed firms

The Role of Cumulative Voting in Protecting Minority Shareholders in Listed Companies

Objective: This article was produced due to the ongoing debate about the protection of minority shareholders in listed companies. It details the challenges faced by minority shareholders and sets out the various methods scholars have identified that can be used to protect minority shareholders. However, some lawmakers believe that cumulative voting is a substantial improvement in the methods commonly used to protect minority shareholders. The article considers what cumulative voting is, how it differs from straight voting rights and what benefits it provides, particularly for minority shareholders. Furthermore, the article considers the effectiveness of cumulative voting as a means of protecting minority shareholders from majority shareholders and delinquent boards of directors. Method: In writing this article, the authors compared the approach used in various countries to protect minority shareholders. They analysed the information gathered in a comparative study process to ascertain the international best practice relating to protecting minority shareholders and cumulative voting rights. At the end of this process, the article concludes with a review of the international best practices and how these may be applied in Kuwait. Result & Conclusion: After considering the theory behind cumulative voting and the application thereof, the conclusion reached is that cumulative voting does not adequately protect minority shareholders. Furthermore, the Kuwaiti legislature has not made cumulative voting mandatory and, as a result, few, if any, companies have adopted this method of voting.

Actions of Expropriation in Family Companies: The Moderating Role of Independent Commissioner’s Control

This study examines the effects of the pyramid structure and disclosure of related party transactions on acts of expropriation in family companies with the independent commissioner’s control as a moderation. This research is a type of quantitative research. This research uses secondary data from annual reports from 31 family companies in 2017- 2018. The data analysis techniques in this research are descriptive statistics, panel data regression analysis, and moderated regression analysis. The study finds that the pyramid structure does not affect expropriation, while disclosure of related party transactions has a negative effect on expropriation. The interaction test shows that the mediator variable could not mediate the pyramid structure and expropriation. Conversely, the moderating variable is able to moderate the disclosure of related party transactions and expropriation. The results of this research can provide input to policymakers to tighten regulations regarding protection for minority shareholders. In addition, the results of this research will add to the government’s references in expanding rules related to the disclosure of related party transactions, especially regarding the supervision of related party transactions carried out by companies.

Directors' and officers' liability insurance and minority shareholders' participation in corporate governance

AbstractThis study empirically investigates the influence of directors' and officers' liability insurance (D&O insurance) on minority shareholders' participation in corporate governance. Using a sample from Chinese A‐share listed companies between 2011 and 2018, we find that D&O insurance can significantly decrease the participation of minority shareholders, and this conclusion remains valid after robustness checks. The mechanism analysis demonstrates that D&O insurance plays a positive role in diminishing minority shareholders' participation through the enhancement of firm performance. Further analyses suggest that the negative association between D&O insurance and minority shareholders' participation is more pronounced in firms with weaker corporate governance practices. These findings provide evidence for the supervisory governance role of D&O insurance, suggesting China should consider encouraging listed companies to purchase D&O insurance for the protection of minority shareholders.

Multiple large shareholders and M&A quality: evidence from China

ABSTRACT This study investigates the influence of the presence of multiple large shareholders (MLS) on the quality of mergers and acquisitions (M&A). Using data from the Chinese market, we find that the presence of MLS in acquiring firms is associated with a higher level of goodwill impairment in the three-year period following the completion of an M&A transaction, relative to firms devoid of such shareholder structures. The further analysis suggests that the identity of these shareholders is crucial; specifically, when the second-largest shareholder is identical to the controlling shareholder, the adverse effects on goodwill valuation are more significant. This relationship is mitigated when the identities of the controlling and the second-largest shareholders differ. The impact is particularly noticeable in transactions involving commitment performance contracts, related party transactions, and in sectors characterized by high goodwill valuations. This study contributes to the literature on the economic outcomes associated with MLS structures in China, a context marked by the prevalence of such ownership arrangements and limited minority shareholder protections.

Juridical Analysis of Blocking Sabh Access In The RI Ministry of Minority Shareholders As a Form of Legal Protection of Minority Shareholders

Legal subject on a protection for minority shareholders is less attendance whether in the formulation of legal theories, or law making process in Indonesia. Prevailing laws and regulations are deemed unable to provide effective protection to legal interests of the shareholder minority. Apart from the right to file derivative action in accordance with Article 61 of Indonesian Company Law, there is a provision under Ministry of Law and Human Rights Decision No. 29/2022 that stipulating the protection to minority shareholder under dispute to file for blocking company's access to the Legal Entity Administration System on the Directorate General of General Legal Administration of the Ministry of Law and Human Rights of the Republic of Indonesia (SABH). The research shows that there is an impact when such a company's access to SABH is blocked, then such a company is denied to process business license; as a consequence of such integration between SABH and Indonesia' business licensing system that is centralized under the Online Single Submission system (OSS). When such company's access to SABH is blocked, access to OSS will also be blocked due to failures on verification process during login to OSS, and there will be notifications on OSS “Login Failed, Please Call SABH”. Thus, such companies are denied to process any business license within the OSS. Furthermore, the research shows there is a case that a minority shareholder who filed for SABH blocking, was charged for committing an unlawful act. For the sake of legal certainty, justification must be carried out for the implementation of protection to minority shareholder rights based on the provisions of the applicable laws and regulations, in this case as specified under PermenkumHAM 29/2022; in furtherance as impact from denied access to process any business license caused by such company's SABH blocked

Board Assurance and Financial Performance of Selected Saccos in Kiruhura District, Uganda

Board assurance is the term used to describe the board's degree of trust in the organization's capacity for efficient risk management. Among SACCOs in Uganda, board assurance and financial performance are important ideas. The financial sector in Uganda has been characterized by investor activity, hostile takeovers, poor corporate governance, weak boards of directors, and protection of minority shareholders. Several banks and other financial institutions have failed to operate despite Bank Uganda's multiple interventions, necessitating regulatory action to maintain the stability of the financial system. This study's goal was to examine how board assurance affected the financial performance of a subset of SACCOs in Uganda's Kiruhura District. This study used both quantitative and qualitative research methods, utilizing a cross-sectional survey research design. At a 95% confidence level or 0.05 error rate, a population of 342 individuals was used. The sample size consisted of 184 respondents, staff members, and members of the six SACCOs that were registered in the Kiruhura area of Uganda as of January 2023. There were two stages to the data collection for analysis. First, SPSS version 20.0 was used to conduct the preliminary data analysis and descriptive statistics on the respondents.In the second phase, structural equation modeling (SEM) was used to evaluate and investigate the structural relationships between the variables in the proposed conceptual model. These statistics included multicollinearity, mean and standard deviation, outliers and extreme values, and missing data. SEM was implemented using Jaffrey's Amazing Statistical Program (JASP) version 0.17.2.0. The study's conclusion supported Ha1 by showing that board assurance (BoA) (=0.343**) significantly improved the financial management of savings and credit co-operative societies (SACCOs) in Uganda. According to the study's findings, SACCO would perform better financially the more its board took responsibility for the company's decisions and told stakeholders about them. The study recommends that; board of directors should be more effective in ensuring that they communicate the decisions clearly and appropriately so that SACCO’s maximize shareholders wealth.

Minority shareholders and tax avoidance

This paper examines whether and how external country-level corporate governance devices affect corporate tax avoidance. Using a panel of public firms across 33 countries, I show that laws empowering minority shareholders hinder corporate tax avoidance, consistent with shareholder protection laws spilling over to tax avoidance through reduced income diversion. I corroborate the validity of these findings using a major corporate governance reform in Italy. In cross-sectional tests, I further document that firms in countries with stricter transfer pricing rules and stronger tax enforcement reduce tax avoidance to a larger extent. Finally, through path analysis, I provide evidence consistent with firms shifting less income to foreign countries in response to stronger minority shareholder rights. Overall, these findings suggest that minority shareholder protection laws can safeguard outside investors and the government against expropriation by insiders.

Corporate cash holdings and financial performance: moderating effect of corporate governance and family ownership

PurposeThis study aims to examine the effect of corporate cash holdings on financial performance. Additionally, it investigates the moderating effect of corporate governance and family ownership on the link between corporate cash holdings and financial performance.Design/methodology/approachThis study uses secondary data regarding the sample of 81 firms listed in the Karachi Stock Exchange (KSE) 100 index from 2011 to 2020. The present study applies the system generalized method of moments (GMM) to estimate the dynamic financial performance models.FindingsThe findings reveal that corporate cash holding is significantly positively linked with financial performance. Further, the findings indicate that the board size and chief executive officer (CEO) duality strengthen the association between cash holdings and financial performance, whereas CEO gender and family ownership weaken the positive effect of cash holdings on financial performance. Furthermore, the findings suggest that Covid-19 significantly negatively affected the financial performance of Pakistani firms.Practical implicationsThe findings have several policy implications. First, policymakers need to increase the board of directors' role in observing the firms' cash-holding behaviour. Policymakers may also formulate policies providing stronger protection for minority shareholders from majority shareholders.Originality/valueTo the best of the authors' knowledge, this study is the first to examine how corporate governance and family ownership influence the link between corporate cash holdings and financial performance in the context of Pakistan.

Does minority shareholder activism impede corporate default risk? Evidence from China

Different from the majority of research studying minority shareholder activism (MSA) on shareholder side, this study investigates the impact of MSA from the perspective of creditors. Based on annual data of listed firms on SSE and SZSE from 2010 to 2020, we find that MSA significantly mitigates corporate default risk through two ways: the “supervision” way and “good advice” way. Such inhibitory effect is strengthened by favorable institutional environment, board secretary concurrently serving as other executives, and board secretary response. Furthermore, we find that the supervision role of MSA is substitution for those of analysts and institutional investors. Our findings provide evidence for strengthening the protection of minority shareholders and encouraging their participation in firm affairs.

Legal Protection for Minority Shareholders Arising from the Delisting of Issuer Shares (A Comparative Study of Indonesian, United States, and Singapore Law)

This research paper provides a comparative analysis of the legal frameworks governing the delisting of issuer shares in Indonesia, the United States, and Singapore. Using a normative legal research approach, supplemented by interviews with members of the Financial Services Authority (OJK) and a Member of the House of Representatives Commission XI, the study explores how each jurisdiction addresses the delisting process, particularly focusing on the protection of minority shareholders . The analysis reveals that Indonesia's legal system, influenced by its Civil Law heritage, contrasts with the Common Law approaches of the US and Singapore, especially in terms of shareholder involvement in voluntary delisting and the specificity of conditions for forced delisting. The study suggests enhancements to the Indonesian framework, such as clearer guidelines for shareholder approval in delisting decisions and more transparent criteria for forced delisting. These recommendations aim to improve the protection of minority shareholders within Indonesia's Capital Market.

Minority shareholder activism and its ex-ante monitoring role in corporate M&A decisions: Evidence from China

Minority shareholder protection is especially important in countries with weak institutions. Prior studies indicate that social media facilitates minority shareholder activism by connecting otherwise isolated individual shareholders and increasing their bargaining power against the controlling shareholders. Whereas prior studies focus on the ex-post monitoring role of social media in corporate governance, we investigate whether and how minority shareholder social media engagement could deter insiders' entrenchment incentives in an ex-ante fashion. Specifically, using high merger premiums and private placement financing as proxies for activities that reflect insider entrenchment incentives in M&As, we find that greater social media engagement lowers M&A premiums and the likelihood of using private placement to benefit the controlling shareholders. This result holds after we control for the governance role of conventional media or analyst coverage, and institutional investors. Our mechanism analysis reveals that the effectiveness of social media in curbing entrenchment incentives in M&A is conditional on the perceived capital market consequences and the perceived likelihood of proposal vetoes. Further analysis shows that minority shareholder activism plays a greater role in curbing entrenchment in M&As when the minority shareholder sentiment expressed on social media is more negative and is more M&A-specific, as well as when social media facilitates higher quality discussions following an exogenous regulatory shock. We also find that minority shareholder activism is associated with better M&A performance. Our study highlights the ex-ante governance role of minority shareholder activism in weak institutions and informs regulators on the critical need to provide a platform for minority shareholders to effectively voice their concerns.

Corporate governance transfers: the case of mergers and acquisitions

AbstractWe study changes in corporate governance around mergers and acquisitions by comparing the ex-post corporate governance of the combined firm with the ex-ante weighted average governance of the bidder and target. We find that when the quality of the bidder governance is better than the target before the acquisition, the ex-post corporate governance quality of the combined firm is better than the ex-ante weighted average of each firm. We document post-acquisition improvement in the combined firm’s board independence, audit committee independence, stock compensation, and minority shareholders protection, proposing that these firm-level attributes serve as potential channels to explain better corporate governance quality of the combined firm. The operating performance of the combined firm also improves when the bidder’s pre-deal governance quality is better than the target. Our results support the portability theory of corporate governance, suggesting that poorly governed targets are better off if acquired by better-governed bidders.

An institutional analysis of UK ostensible minority shareholder protection mechanisms

ABSTRACT This article argues that there is a conundrum at the heart of the company law understanding of ostensible minority protection mechanisms (the derivative claim and unfair prejudice): they are terrible at protecting those that they are thought to protect. The hurdles to access the remedies are too high, there is undue focus on the behaviour of the wronged party, costs are uncertain, and relief inadequate. This conundrum can be resolved by applying an institutional analysis and exploring the rules from the perspective of the company. Here, a number apparent weaknesses in the regime are mostly strengths for the company. The remedies are important for the company as they act as a ‘lightning rod’: all complaints by disgruntled shareholders are funnelled through these hegemonic argumentation structures, which protect the institutional arrangement of the company and, in turn, that part of the institutional environment which is company law.

Protection of the Minority Shareholders in Company Law Regime

This comprehensive article explores the critical role of minority shareholders and the legal frameworks and mechanisms established to protect the interests and rights of minority shareholders within the realm of company law and corporate governance. Minority shareholders, despite their smaller ownership stakes, hold a substantial influence in maintaining the equilibrium of power, ethical conduct, and financial integrity within the corporations. The safeguarding and empowerment of minority shareholders within the expansive domain of company law are not just legal obligations but also the basic ethical principle of corporate governance. This article engages in an exploration of the complex mechanisms and prosperous legal provisions designed to ensure the protection, participation, and prosperity of minority shareholders within the vast realm of company law and it also into understanding the role of minority shareholders as guardians of corporate democracy provides a foundation for appreciating their influence in the corporate world. The Minority Shareholders are not just shareholders but they are also the advocates for ethical conduct, transparency, and accountability of the Company. The neglect of the protection of the minority shareholders within a company can result in a range of adverse consequences, and the article explores the negative effects of not safeguarding the rights and interests of minority shareholders, including the erosion of trust and confidence, reduced investment, and diminished market value. The article highlights the paramount significance of these safeguards, examines the complexities of regulatory architecture, navigates potential challenges, and provides an exhaustive understanding of the comprehensive and evolving protection, rights, and opportunities extended to the minority shareholders in modern corporate governance.

Legal Issues Arising from Comcasts Acquisition of DreamWorks and Oriental DreamWorks

Comcast Corporations acquisition of DreamWorks Animation SKG Inc. in 2016 presents a case study of the legal complexities involved in the merger and acquisition legal framework in the United States and China. This paper explores the different aspects of this acquisition, including antitrust regulations, cross-border legal issues, minority shareholder rights, intellectual property management, and post-acquisition integration. Antitrust concerns and foreign regulations, such as Chinas Anti-Monopoly Law, play a significant role in this case which highlights the necessity of compliance with regulatory frameworks to avoid penalties and legal disputes. The importance of protecting minority shareholders' rights in an acquisition is demonstrated by the lawsuit filed by AACERS against DreamWorks CEO Jeffrey Katzenberg. The need for transparency, fairness, and fulfilling fiduciary duties is crucial to mitigate the risk of legal conflicts. This paper also includes the transaction of intellectual property assets. Evaluate the post-acquisition integration procedure, including management restructuring, marketing strategy, and layoffs, with a focus on the necessity of dispute resolution and maintaining compliance with the relevant laws and regulations. Overall, the acquisition of DreamWorks Animation shows some valuable insights and experiences of the legal complexities of an acquisition that involves a cross-border company. Companies can accelerate the acquisition process and integrate smoothly after the acquisition by carefully considering these legal complexities before making the deal.

Multiple large shareholders and cost stickiness: evidence from China

Using a sample of Chinese listed firms from 2001 to 2017, this study investigates the impact of multiple large shareholders (MLS) on cost stickiness from the agency costs perspective. We find a positive association between MLS and cost stickiness after controlling for various determinants of cost stickiness. The results of additional analyses suggest that coordination costs among large shareholders make it challenging to monitor managers, and stronger protection of minority shareholders helps to eliminate the effect of MLS on cost stickiness. This paper extends our understanding of the ‘dark side’ of MLS and complements existing research investigating the determinants of cost stickiness from the ownership structure perspective.

The bright and dark sides of minority shareholder protection: Evidence from the separate vote counts disclosure rule in China

The separate vote counts (SVC) disclosure rule implemented in 2013 requires Chinese public firms to separately disclose the vote counts of minority shareholders for each proposal. Evaluating the policy's effectiveness in serving its goal of minority shareholder protection, we first find that SVC disclosure enhances minority shareholders' value by suppressing tunneling behaviors and increasing dividend payouts, leading to higher corporate valuation and stock returns. On the other hand, consistent with a principal-agent model that features the information disadvantage of minority shareholders, we find that SVC disclosure leads to lower investment efficiency among firms with higher information asymmetry. Additional tests highlight that counterbalances between majority shareholders, chairperson-CEO separation, and institutional ownership could act as internal and external governing measures that alleviate unintended consequences with respect to investment efficiency.