We find that institutional investors' local culture of religiosity influences their stock lending decisions and induces short-sale constraints on the underlying stocks. Firms with higher ownerships by blockholders located in more religious counties are associated with higher utilization of lendable shares. This effect is driven by a lower supply of, rather than a higher demand for, lendable shares. Stock lending fees of such firms are higher, and higher short interests of such firms more strongly predict lower future stock returns. Our findings suggest that the cultural norms of institutional investors can create market friction through the stock lending channel.

In this paper, due to the important influence of corporate governance on corporate financial behaviors and from an angle of corporate governance, we develop six hypotheses based on overseas and home relevant researches and data of Chinese listed companies from 1999 to 2003, and then we do hypotheses testes with regression models to examine the impact of share percent of the top 5 shareholders and counterbalance mechanism among blockholders on cash dividend distribution of listed companies, and to explore influence and counterbalance mechanisms in tunneling of cash dividend which derived from the special phenomena of “same shares same rights but different price”. We find that share percent of top 5 shareholders, control ability (or combined control ability) and balance degree (or combined balance degree) of blockholders have important influence on tunneling of cash dividend distribution. Lastly, the paper proposes five suggestions to restrict controlling shareholders to enlist private interests from tunneling of cash dividend and to protect rights and interests of small and medium shareholders.

This paper examines the association between ownership structure and the extent of Web disclosure of 1056 listed companies of differential privatization stage in China. Literature suggests that state controlled economies are expected to have restricted forms of information disclosure and blockholder’s equity can reduce the needs for information disclosure. Our results show that state ownership will curtail the extent of Web disclosure in the post-privatization stage and private block shareholding is positively related to Web disclosure for low privatization firms, but not for highly privatized companies. The findings indicate that state and private blockholders have diverse Web reporting policies during ownership evolution and information asymmetry may exist in post-privatization stage. The results suggest that reinforcement of the institutional environment and continuous scrutiny of a company’s reporting practices in the post-privatization stage should be emphasized.

The study aims to analyze the role of institutional investors in mediating the interest conflicts between blockholders and minority shareholders in emerging markets. China’s Non-tradable Share Reform provides us a perfect research environment. Before the reform, the ownership of Chinese public firms was concentrated in one or several blockholders. This part of block shares was non-tradable, and tradable shares were held by minority shareholders and institutional investors like mutual funds. Chinese government launched Non-tradable Share Reform in 2005, giving non-tradable shares liquidity rights. At the same time, non-tradable share owners had to compensate tradable share owners, such as offering a certain percentage of shares to them. The compensation schemes were advanced by non-tradable share owners and must be supported by two-thirds of votes cast by tradable share owners. Our study finds that institutional investors did actively participate in voting, but their number and holdings were reversely related with the compensation level. Our results suggest that institutional investors played shareholder activism in this reform, but their activism served for blockholder’s interests rather than minority shareholders’.

The 2005 policy decision to change the status of non-tradable state and non-state shares into tradable A shares ushers in a new era in the stock markets of China. Over time all of these shares will be tradable and potentially transferred to foreign and domestic private sector investors. These changes have the potential to significantly alter the monitoring and control of the majority of listed firms that until now have been controlled by tightly held blockholders of non-tradable shares. It is therefore timely to reassess the corporate governance of Chinese listed firms. This paper reviews the theoretical and empirical corporate governance literature in China.

We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. Looking at equity prices from 1990 to 2001, we find that these mechanisms are strong complements. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10 - 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to mimic the importance of internal governance generates annualized abnormal returns of 8%, though only in the presence of ‘high’ vulnerability to takeovers. Further, we show that the complementary relation exists for firms with lower industry-adjusted leverage and is stronger for smaller firms. The complementary relation is confirmed using accounting measures of profitability. Using data on acquisitions, firm level Q’s and accounting performance, we explore possible interpretations, providing preliminary evidence for a risk effect as well.