This paper tests the relation between large shareholders and firm value using a recent reform in China’s equity market. The reform eliminated the discrepancy between large shareholders’ voting rights and cash-flow rights. The paper finds that large shareholders expropriate less through related party transactions after the reform when the discrepancy between their voting rights and cash-flow rights prior to the reform was larger. It also finds that minority shareholders gain from the reform: firms earn higher excess returns around the reform announcements when the discrepancy was larger. Finally, it provides the evidence of efficiency gains associated with the reform. The paper concludes that the discrepancy between large shareholders’ voting rights and cash-flow rights can lead to efficiency losses.