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Do Greater Shareholder Voting Rights Reduce Expropriation? Evidence from Related Party Transactions

Nan Li

Title:
Do Greater Shareholder Voting Rights Reduce Expropriation? Evidence from Related Party Transactions
Author(s):
Li, Nan
Thesis Advisor(s):
Rajgopal, Shivaram
Ferri, Fabrizio
Date:
Type:
Theses
Degree:
Ph.D., Columbia University
Department(s):
Business
Persistent URL:
Abstract:
In the presence of business groups, the expropriation through related party transactions (RPTs) is common and costly to minority shareholders. At the same time, it is well recognized that RPTs can help firms overcome market shortcomings. Using the setting of India's RPT voting rule, I find that a mandatory and binding shareholder voting mechanism helps filter out expropriation. Minority shareholders actively raise their voice against RPT resolutions, resulting in substantial shareholder dissent. My difference-in-difference analysis reveals that shareholder voting has a significant deterrence effect on RPT volume, especially on financial RPTs. I also find that stock prices react positively to news signaling the passage of the voting rule, and that the association between firm profitability and RPT increases following rule's adoption, suggesting that rule has a positive effect on shareholder value. Lastly, I show that mandatory RPT voting makes Indian firms more attractive to foreign institutional investors.
Subject(s):
Accounting
Finance
Economics
Stockholders' voting
Eminent domain
Related party transactions
Item views
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Suggested Citation:
Nan Li, , Do Greater Shareholder Voting Rights Reduce Expropriation? Evidence from Related Party Transactions, Columbia University Academic Commons, .

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