Purpose – This study uses cash flow rights and the contestability of multiple large shareholders to explore the impact of multiple large shareholders on investment efficiency in the Chinese setting.
Theoretical framework – We introduce Asymmetric Information Theory and Principal-Agent Theory to support our study.
Design/methodology/approach – Empirical research (including the PSM method, IV method, threshold method, etc.) is used in this study. In addition, this paper selects the non-financial A-share listed companies in both the Shanghai and the Shenzhen stock markets from 2007 to 2016 as the sample.
Findings – Our results show a positive correlation between multiple large shareholders and absinvestment among Chinese listed firms.
Practical & social implications of research – Contrary to previous views that multiple large shareholders have positive governance effects, we provide evidence that multiple large shareholders have negative governance effects. And we provide new evidence that controlling shareholders collude with multiple large shareholders to seek for excess private benefits by increasing company absinvestment.
Originality/value – This study contributes to the literature in several important ways. First, it shows a positive correlation between multiple large shareholders and absinvestment, which extends the research of Jiang et al. (2018), who found that multiple large shareholders can significantly enhance investment efficiency. Second, this paper is the first to introduce a threshold model to study the impact of controlling shareholders on the relationship between multiple large shareholders and absinvestent, showing that the positive relationship between them is strengthened by promoting the governance effect of controlling shareholders.
Keywords – multiple large shareholders, controlling shareholders, absinvestment, collusion, threshold model
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