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Blockholder Exit Threats in the Presence of Private Benefits of Control: A Quasi-Experiment from China's Split-Share Structure Reform
- Publication Year :
- 2015
- Publisher :
- HAL CCSD, 2015.
-
Abstract
- Exit theory predicts a governance role of non-managerial blockholders’ exit threats; but this role could be ineffective if the managers’ potential private benefits exceed their loss in stock-price declines caused by non-managerial blockholders’ exit. We test this prediction using the Split-Share Structure Reform (SSSR) in China, which provided a large, exogenous, and permanent shock to the cost for non-managerial blockholders to exit. Using a difference-in-differences design combined with propensity-score matching, we find that firms whose non-managerial blockholders experience an increase in exit threat have a greater improvement in performance than those whose non-managerial blockholders experience no increase. The improvement is as much as 37.2% of the average pre-SSSR treatment sample operating performance. Moreover, the governance effect of exit threats becomes ineffective in the group of firms with the highest concern for private benefits of control. Finally, a battery of theory-motivated tests show that the documented effects are unlikely explained by non-managerial blockholder intervention or some well-known intended effects of SSSR.
- Subjects :
- Matching (statistics)
China
JEL: F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business
Exit-Threat Theory
Monetary economics
Private Benefits of Control
JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G31 - Capital Budgeting • Fixed Investment and Inventory Studies • Capacity
JEL: F - International Economics/F.F3 - International Finance/F.F3.F30 - General
JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G34 - Mergers • Acquisitions • Restructuring • Corporate Governance
Private benefits of control
Split-Share Structure Reform
Economics
Operating Performance
JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G30 - General
Public economics
Corporate governance
JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
Market liquidity
Intervention (law)
Shock (economics)
JEL: M - Business Administration and Business Economics • Marketing • Accounting • Personnel Economics/M.M4 - Accounting and Auditing/M.M4.M41 - Accounting
Liquidity
Quasi-Experiment
[SHS.GESTION]Humanities and Social Sciences/Business administration
[SHS.GESTION] Humanities and Social Sciences/Business administration
Quasi-experiment
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....6dde081beafde5bfa21fdf096c4b9335