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- All Subjects: Bond market
- All Subjects: Shareholder Activism
- Creators: Yan, Hong
Description
During the past decade, the Chinese bond market has been rapidly developing. The percentage of bond to total social funding is constantly increasing. The structure and behavior of investors are crucial to the construction of China’s bond market. Due to specific credit risks, bond market regulation usually involves in rules to control investor adequancy. It is heatedly discussed among academia and regulators about whether individual investors are adequate to directly participate in bond trading. This paper focuses on the comparison between individual and institutional bond investors, especially their returns and risks. Based on the comparison, this paper provides constructive suggestions for China’s bond market development and the bond market investor structure.
ContributorsLiu, Shaotong (Author) / Gu, Bin (Thesis advisor) / Zhu, Ning (Thesis advisor) / Yan, Hong (Committee member) / Arizona State University (Publisher)
Created2016
Description
Shareholder Activism is a mechanism by which investors who hold a significant but
non-majority percentage of a company’s stock, exercise their voting rights, participate in
corporate governance and influence operational decisions of target companies. The
purpose is improve corporate governance, increase firm performance and boost share
-holders’ returns. Existing studies of shareholder activism, based largely in mature
capital markets like the US, come to different conclusions regarding its impact on firm
performance.
In this paper, I collect data on shareholder activism events in the China A Share
market between 2006 and 2016. The sample includes 60 companies targeted by 42
activist investors over this period. I find that institutional investors, typically industrial
capital and private funds, playing an increasingly important role in corporate governance
of Chinese listed companies through activism. The disclosure of the holdings of activists
results in large gains in the target firm. I also find subsequent improvements in long
-term operational performance of target firms. Activist investors in China focus on
smaller targets and those characterized by higher agency costs and lower operating
performance. Activists appear to be largely concerned with improvements in business
strategy and M&A activity. Non-hostile behavior is more likely to be related to successful
activism in China. In addition to statistical evidence, I present case studies of the
“BaoWan dispute” and the activist investment of Butterfly Capital in two firms,
“Guonong” and “Xiuqiang”. The case studies highlight the mechanism employed by these
firms to influence performance.
I conclude with policy recommendations and direction for further research.
non-majority percentage of a company’s stock, exercise their voting rights, participate in
corporate governance and influence operational decisions of target companies. The
purpose is improve corporate governance, increase firm performance and boost share
-holders’ returns. Existing studies of shareholder activism, based largely in mature
capital markets like the US, come to different conclusions regarding its impact on firm
performance.
In this paper, I collect data on shareholder activism events in the China A Share
market between 2006 and 2016. The sample includes 60 companies targeted by 42
activist investors over this period. I find that institutional investors, typically industrial
capital and private funds, playing an increasingly important role in corporate governance
of Chinese listed companies through activism. The disclosure of the holdings of activists
results in large gains in the target firm. I also find subsequent improvements in long
-term operational performance of target firms. Activist investors in China focus on
smaller targets and those characterized by higher agency costs and lower operating
performance. Activists appear to be largely concerned with improvements in business
strategy and M&A activity. Non-hostile behavior is more likely to be related to successful
activism in China. In addition to statistical evidence, I present case studies of the
“BaoWan dispute” and the activist investment of Butterfly Capital in two firms,
“Guonong” and “Xiuqiang”. The case studies highlight the mechanism employed by these
firms to influence performance.
I conclude with policy recommendations and direction for further research.
ContributorsXie, Fenghua (Author) / Wahal, Sunil (Thesis advisor) / Yan, Hong (Thesis advisor) / Lee, Peggy (Committee member) / Arizona State University (Publisher)
Created2017