Empowered minority shareholders and corporate cash dynamics: Empirical evidence from China's online voting reform

This study examines whether enhanced minority shareholder voting influences corporate liquidity management. Using China's Rules for the Implementation of Online Voting (Rules) as a natural experiment, we find that increased minority shareholder participation leads to a significant reduction in...

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Bibliographic Details
Published inEconomic analysis and policy Vol. 84; pp. 354 - 373
Main Authors Lai, Shaojie, Luo, Zixuan, Wang, Qing Sophie, Pu, Xiaoling
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.12.2024
Subjects
Cash
Corporate governance
Minority shareholder
Online voting
Minority shareholder
Corporate governance
Cash
G30
Online voting
G32
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Summary:This study examines whether enhanced minority shareholder voting influences corporate liquidity management. Using China's Rules for the Implementation of Online Voting (Rules) as a natural experiment, we find that increased minority shareholder participation leads to a significant reduction in corporate cash hoarding. By enabling their active participation, the Rules curtails tunneling activities, especially in firms with excess cash reserves, thereby mitigating expropriation by controlling shareholders. This effect is notably stronger in firms with weaker external monitoring mechanisms. Our findings also reveal that empowered minority shareholders contribute to more efficient cash allocation, reflected in higher market valuations of cash holdings and a quicker adjustment toward optimal cash levels. Overall, this study highlights the economic benefits of strengthened minority voting rights in mitigating agency problems and promoting value-enhancing liquidity management strategies.
ISSN:0313-5926
DOI:10.1016/j.eap.2024.09.009