Do non‐controlling large shareholders affect corporate over‐financialization?: A shareholder hybrid perspective

Abstract

This study investigates the monitoring role of non‐controlling large shareholders (NCLS) on firms' over‐financialization. We compared over‐financialized firms with NCLS with those without. Our first finding suggests that firms with NCLS have a lower extent of over‐financialization. We also find that the hybridity between controlling shareholders and NCLS in a firm decreases over‐financialization. Additional analyses show that NCLS monitor over‐financialization by alleviating corporate myopia. Furthermore, our results reveal that over‐financialization decreases with the relative strength of NCLS compared to controlling shareholders, NCLS' number, and NCLS' shareholdings. Our conclusions remain valid after accounting for endogeneity and employing measures of over‐financialization.

Can common institutional ownership inhibit corporate over-financialization? Evidence from China

“…Second, we need to identify companies that are overly financialized. Drawing on the measure of Li and Zhang (2023), we use the difference between the financialization level of a firm minus the average level of financialization of firms in the same year and in the same industry as a measure of whether or not it is over-financialized: when the difference is greater than 0, it means that there is over-financialization in the firm. The greater the value of Overfin , the higher the degree of corporate over-financialization is.…”

“…(2022) point out that multiple large shareholders significantly inhibit corporate financialization. Li and Zhang (2023) find that non-controlling large shareholders can inhibit corporate over-financialization. Liu et al.…”

“…Jiang et al (2022) point out that multiple large shareholders significantly inhibit corporate financialization. Li and Zhang (2023) find that non-controlling large shareholders can inhibit corporate over-financialization. Liu et al (2023) provide empirical evidence that strengthening corporate governance can inhibit the financialization of non-financial firms, and Zhou and Qi (2023) find that implementing innovation pilot zones has a mitigating effect on corporate financialization.…”

Does the Value-added Tax Reform Restrain Corporate Financialization? Based on the Perspective of Credit Refund Policy

“…To ensure the stability of the results, we change the measurement method of corporate nancialization for re-estimation. Referring to existing research, n is replaced by the proportion of investment income, fair value change pro t and loss, and other comprehensive income in operating pro t ( n1) (Liu et al, 2019;Li & Zhang, 2023). Column (1) in Table 3 reports the regression results, and the did coe cient maintains the original sign direction and signi cance.…”

Multiple large shareholders, agency problem, and firm innovation

“…Meanwhile, multiple large shareholders can reduce controlling shareholders' self-interest behavior such as related transactions and optimize resource allocation, so as to improve innovation efficiency (Ben-Nasr et al, 2015). However, some studies find that too strict supervision from multiple large shareholders will decrease enterprise operating efficiency (Li & Zhang, 2023). Multiple large shareholders may conspire with controlling shareholders that make the enterprise pursue short-term revenue and decrease long-term investment such as firm innovation (Cai et al, 2016).…”