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Impact of foreign shareholding on major shareholders’ tunneling

Author

Listed:
  • Zhong, Shengyang
  • Liu, Yibo
  • Zhang, Xin
  • Huang, Shuai
  • Zhang, Wen

Abstract

This study focuses on listed companies in Shanghai and Shenzhen, China, from 2012 to 2022, using empirical analysis to investigate how foreign shareholding influences the hollowing-out behavior of major shareholders. Findings highlight the beneficial role of foreign shareholders in corporate governance, demonstrating that even a modest increase in foreign ownership can significantly reduce the controlling shareholders’ infringement on the interests of small and medium-sized shareholders. However, excessively high foreign shareholding may impact the company's internal governance and contribute to major shareholders’ hollowing-out behavior. Furthermore, the study finds that increased foreign ownership encourages firms to implement equity incentive plans, effectively limiting major shareholders’ short-selling activities. These findings offer valuable insights into optimizing foreign shareholding structures and enhancing corporate governance.

Suggested Citation

  • Zhong, Shengyang & Liu, Yibo & Zhang, Xin & Huang, Shuai & Zhang, Wen, 2025. "Impact of foreign shareholding on major shareholders’ tunneling," Finance Research Letters, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325005707
    DOI: 10.1016/j.frl.2025.107307
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