Distinct from existing studies on general institutional investors and institutional investor cliques, this study examines how common institutional owners, who simultaneously hold more than 5% equity blocks in at least two publicly traded firms within the same industry, influence firms’ bad mergers and acquisitions (M&As) in China. Contrary to the “conspiracy tort” view, according to which common institutional owners are more likely to vote for bad M&A deals to pursue internalized gains from industry portfolios (Antón et al., 2022b), our results strongly support the “synergy governance” view, according to which common institutional owners perform more actively and effectively in monitoring against bad M&As and improving M&A quality. There is further evidence that common institutional owners with greater peer linkages and industry power and longer-term holdings are more likely to oppose deals with negative acquirer returns. Finally, we find that the effect of common institutional ownership on M&As is more pronounced among firms with stronger earnings management, moderate stock return synchronicity, less management shareholding and higher management expenses. The results are consistent with the “synergy governance” hypothesis whereby common institutional owners are able to leverage their advantages of industry information and supervisory experience to improve the information environment and corporate governance of the firms they hold. Overall, in China’s market, common institutional owners play an active external governance role and effectively improve M&A quality.

This study investigates the impact of independent directors' participation in the shareholders meeting on corporate governance, and finds that the more frequently the independent directors attend shareholder meetings, the lower the degree of earnings management by the enterprise; the mechanism test shows that more information increases the probability, frequency, and severity of independent directors’ subsequent dissenting opinions; This study identified a new channel for independent directors to independently obtain true information and this is of great significance for regulators, shareholders, company board, and other stakeholders with an interest in how the information influence independent directors governance effects.

We examine an important yet understudied form of reputational sanction in China, namely public criticisms imposed on culpable firms by the Chinese stock exchanges from 2013 to 2018. We find significantly negative cumulative abnormal returns around the announcement date, and they were affected by several factors, including financing propensity, governance mechanism, and equity nature. However, the market reaction is significantly negative only for firms relying on external financing and non-state enterprises, and importantly, becomes insignificant in cases where the firm had self-exposed misconduct before the official announcement of public criticism. Further, we examine other effects of public criticism, finding that public criticism does not improve firms’ long-term values, nor produce strong deterrence to change their behaviour. Overall, the evidence of the effects of public criticism on culpable firms is mixed, suggesting that reputational sanction is a weak, if not ineffective, instrument of market regulation in China.

We examine the information content of changes in shareholdings after private issuance of public equity (PIPE) by mutual funds that participate in PIPEs in China. The results show that the changes in shareholdings is positively related to alpha and cumulative abnormal return (CAR) for PIPE issuers with high information asymmetry, suggesting that the participating mutual funds have superior information. These results are robust after controlling for investment skill, geographic location, and alumni relation. The positive relation between shareholding change and information content is driven by PIPE issuers with weaker corporate governance. In addition, the positive relation is stronger when the placement discount is lower. These results are consistent with a hypothesis that controlling shareholders/management in Chinese PIPE firms may collude with mutual funds to do tunneling.

We examine the effects of controlling shareholder stock pledge on corporate acquisition decisions and associated performance. Consistent with our aggravated expropriation hypothesis, we find that pledging firms in China initiate more takeovers, but these acquisitions conducted by pledging firms experience lower announcement returns. We adopt the difference in differences and the instrumental variable approaches to establish causality. Channel tests further reveal that pledging acquirers overpay for the deals and are more likely to be involved in related party transactions. Cross-sectionally, we find that the relations between the share pledge and corporate acquisitiveness and returns are more pronounced for non-SOEs and firms with high-level excess cash. Lastly, we document that pledging acquirers underperform in the long-run in terms of lower ROAs and a greater likelihood of goodwill impairment. Overall, our findings indicate that controlling shareholders increasingly expropriate minority shareholders through self-serving corporate takeovers after the stock pledge.

We examine the effects of controlling shareholder stock pledge on corporate acquisition decisions and associated performance. Consistent with our aggravated expropriation hypothesis, we find that pledging firms in China initiate more takeovers, but these acquisitions conducted by pledging firms experience lower announcement returns. We adopt the difference in differences and the instrumental variable approaches to establish causality. Channel tests further reveal that pledging acquirers overpay for the deals and are more likely to be involved in related party transactions. Cross-sectionally, we find that the relations between the share pledge and corporate acquisitiveness and returns are more pronounced for non-SOEs and firms with high-level excess cash. Lastly, we document that pledging acquirers underperform in the long-run in terms of lower ROAs and a greater likelihood of goodwill impairment. Overall, our findings indicate that controlling shareholders increasingly expropriate minority shareholders through self-serving corporate takeovers after the stock pledge.

Using Chinese data, we investigate the impact of the China Semi-Mandatory Payout Policy that sets an explicit requirement that firms need to distribute at least 20% of their average annual net profits as cash/stock dividends accumulatively in three consecutive years before refinancing via seasoned equity offerings. Firms with the payout level below (above) the cutoff imposed by the Semi-Mandatory Payout Policy are regarded as Treated (Control) group. We find that Treated firms are more likely to cut investment, especially long-term innovation investment, and perform poorly compared to Control group due to lack of money. Treated firms also tend to use earnings management assisting in financing through the debt market as an alternative way to raise money. The negative impact of cutting investment caused by the Semi-Mandatory Payout Policy is more pronounced for firms suffering from severe financial constraints, firms having good corporate governance, and firms located in less financial development areas. We attribute findings to the difficulty of accessing capital that is implicitly increased the China Semi-Mandatory Payout Policy, which alters firms’ behavior leading to insufficient investments and destroys firms’ value.

This study investigates the relationship between gender diversity on the board and dividend payouts in China using a large sample over the period 2003–2017. Our results provide robust and strong evidence showing that gender diversity on the board is positively associated with cash payments of dividends. The empirical outcomes confirm that gender diversity on the board facilitates corporate governance and subsequently promotes dividend payouts. We demonstrate that gender diversity on the board has the greatest effect when the board has critical mass participation (three or more female directors) compared with only their token participation. However, independent female directors increase dividend payouts, while female executive directors do not have a significant impact. Furthermore, we extend the literature on the relationship between dividend payments and government ownership by providing evidence that gender diversity has a higher impact on dividend payouts for state-owned enterprises than non-state-owned enterprises. After controlling the endogeneity problems, our findings are reliable and robust.

In this article, we analyse investment preferences of domestic and foreign institutional investors to the management quality of Chinese listed firms. We find that foreign institutional investors hold higher shareholding in firms with greater numbers of executive officers with MBA degrees, having served as vice president or higher prior to joining the firm and sitting on multiple boards. Foreign institutional investors in China also show preference over investee firms with larger board size. However, they pay no attention to whether directors are independent from the firm management and meet often. Domestic institutional investors show preference to all management quality indicators that are associated with foreign institutional ownership. In addition, domestic institutional investors invest more in firms where the executive officers are certified public accountants (CPA) and are longer tenured in their current position. Furthermore, domestic institutional investors pay more attention to corporate governance of investee firms than foreign institutional investors. Finally, we find that domestic institutional investors show a strong preference to firms that have been invested by at least one Qualified Foreign Institutional Investor (QFII), even after controlling for QFII’s preference for management quality. This indicates that the QFIIs’ international reputation has been used by domestic institutional investors as a positive signal for investment opportunities.

This paper surveys how and why the share spilt reform enhance the corporate governance using agency cost as proxy from the perspective of stockholders’ conflict and liquidity increase in the process of share spilt reform respectively. We find that share spilt reform brings significant governance improvement. Besides, we use some governance effect and liquidity theory proposed by Edmans et al. (2011) to testify by which means the share split reform enhance the corporate governance. What is more, we find that the corporations with great difficulty, which represented for severe shareholders’ conflict, in carrying forward the reform tend to have severe governance problems while it was this kind of corporation that benefited most from the reform and formed the main driving force of the realization of the goal of reform. It has some implication on China’s current reform; that is, only when toughest problems have been overcome will the goal of reform be achieved.