ABSTRACT
This paper examines the impact of a common ownership structure – multiple large shareholders (MLS) – on controlling shareholders’ related-party mergers and acquisitions (M&As). Using a sample of 2,923 Chinese listed firms from 2003 to 2018, we find that firms with MLS are less likely to initiate controlling shareholders’ related-party M&As and if they do, pay lower M&A premium. Further tests show that the impact of MLS on controlling shareholders’ related-party M&As is more prominent when the relative power of other blockholders is stronger, when MLS are of different identity, when corporate governance mechanism is weaker, and when the agency conflicts are more severe. We also find that the presence of MLS is associated with higher related-party M&A performance. Our results imply that MLS monitor the controlling shareholder and improve governance, and hence restrain related-party M&As.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 For instance, Boubaker (Citation2007), Laeven and Levine (Citation2008), and Ben-Nasr, Boubaker, and Rouatbi (Citation2015) report that MLS are present in 34%, 36.6%, and 34.1% of French firms, respectively. Attig, El Ghoul, and Guedhami (Citation2009) find that firms with MLS account for 33.2% of East Asia firms.
2 For this model, Multiple is the dependent variable, whilst the set of firm characteristics employed in our baseline analysis are included as the independent variables.
3 We also apply the Heckman two-step model in the analysis of the effect of the relative power and heterogeneous identity of MLS on controlling shareholders’ related-party M&As and the results are robust.
4 We also apply the Heckman model in the case of BHAR and ROA and the results are robust.