Motivation versus Action: Shareholder activism by non-controlling shareholders in China

Using a sample of non-financial listed firms in China with non-controlling large shareholders (NCLSs) from 2006 to 2022, we examine the determinants of NCLSs’ ability to engage in shareholder activism through director appointments and analyze how institutional environments shape these processes. We find that NCLSs are less likely to appoint directors when entering a firm through direct purchases in the secondary market or when the controlling shareholders increase their holdings. By contrast, NCLSs with a relatively greater power or business ties to the firm are more likely to engage in activism. Additional analyses reveal that the negative effects of direct entry and controlling shareholders’ increased holdings are contingent on contextual factors such as property nature, corporate culture, and marketization levels. We further find that NCLSs’ activism can significantly enhance firm value. Overall, our findings highlight that NCLSs’ activism is shaped not only by their own motivations but also by their dynamic interactions with controlling shareholders. The study provides new insights into the interplay between multiple large shareholders and shareholder activism in emerging markets, and underscores the importance of collaborative governance strategies among large shareholders in concentrated ownership. JEL codes: G32, G34, O16