Dark side of institutional shareholder activism in emerging markets: Evidence from China's split share structure reform

Abstract

This study aims to investigate the role that institutional investors played exploiting the split share structure reform launched in 2005 in China. Since that time, non-tradable majority shareholders have had to compensate minority tradable shareholders to obtain the rights to transfer their shares in the capital markets. The compensation ratio proposed by non-tradable majority shareholders needs to be approved in at least two-thirds of the votes cast by tradable shareholders, among which the most powerful are the institutional investors. Our study finds that institutional investors actively participate in voting, but their activism is beneficial to majority shareholders rather than minority ..