Disputes over Corporate Control at Chinese Firms

ABSTRACT

We investigate disputes over corporate control in Chinese stock markets from 2001 to 2012. We find that firms involved in such disputes usually have low financial performance and high leverage risks. Because control rights can create value for shareholders, the cumulative abnormal returns around the fights for control are positive in both the short and long runs. In addition, the top management benefits from improved financial performance afterward.

KEY WORDS:

• corporate governance
• cumulative abnormal return
• disputes over corporate control

Notes

1. CSMAR GuoTaiAn (CSMAR GTA) was designed and developed by GuoTaiAn Information Technology. It was initiated in 2000. The database is similar as the combination of CRSP and COMPUSTAT, which provides financial and accounting data on firms listed on the Chinese stock markets.

2. China A-shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. The A-shares are only available for purchase by mainland citizens due to China’s restrictions on foreign investment.

3. B-shares are equity share investments in companies based in China. They trade in foreign currency on two different Chinese exchanges. On the Shanghai Exchange, B-shares trade in US dollars. On the Shenzhen Exchange, B-shares trade in Hong Kong dollars.

4. For example, Wuhan Department Store (EWuShang, 000501) had two disputes over control during the period. The first was in 2006, and the second in 2011.

Additional information

Funding

This work was supported by Science Foundation of Beijing Language and Culture University (supported by “the Fundamental Research Funds for the Central Universities”): [Grant number 18YBB21].