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Multiple Large Shareholder Structure and Governance: The Role of Shareholder Numbers, Contest for Control, and Formal Institutions in Chinese Family Firms

Published online by Cambridge University Press:  02 February 2015

Jin-hui Luo ,
Di-fang Wan ,
Di Cai  and
Heng Liu
Jin-hui Luo
Affiliation:
Xiamen University, China
Di-fang Wan
Affiliation:
Xi'an Jiaotong University, China
Di Cai
Affiliation:
Xi'an Jiaotong University, China
Heng Liu
Affiliation:
Sun Yat-sen University, China
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Abstract

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The principal–principal (PP) perspective of corporate governance shows that multiple large shareholder (MLS) structure has competing monitoring and entrenchment governance effects. We argue that the dominant effect depends on contest for control among large shareholders and the number of large shareholders involved. Using data from Chinese family listed companies from 2004 to 2007, this study shows inverse U-shaped relationships between contest for control and corporate market value, as measured by Tobin's Q, and between the number of large shareholders and corporate market value. Findings indicate that at low to medium levels of contest for control or number of large shareholders, formal institutions can strengthen MLS structure's monitoring effect and can help this effect last longer. As a whole, the findings extend the institution-based view in the context of family corporate governance by showing that formal institutions can shape the ability of MLS structure to exert governance.

Keywords

Chinafamily firmsinstitution-based viewmultiple large shareholder (MLS) structureprincipal-principal (PP) conflict中国家族企业制度基础观多个大股东结构双委托人视角
Type
Articles
Information
Management and Organization Review , Volume 9 , Issue 2 , July 2013 , pp. 265 - 294
Copyright
Copyright © International Association for Chinese Management Research 2013

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