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ENQUIRE PROJECT DETAILS BY GENERAL PUBLIC |
| Project Details |
| Funding Scheme : | General Research Fund | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Number : | 14613616 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Title(English) : | Shareholder Voting in China | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Title(Chinese) : | 中國股東表決制度研究 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal Investigator(English) : | Prof Xi, Chao | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal Investigator(Chinese) : | 習超 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Department : | Faculty of Law | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Institution : | The Chinese University of Hong Kong | |||||||||||||||||||||||||||||||||||||||||||||||||||
| E-mail Address : | chaoxi@cuhk.edu.hk | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Tel : | 39431142 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Co - Investigator(s) : |
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| Panel : | Humanities, Social Sciences | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Subject Area : | Social and Behavioural Sciences | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise Year : | 2016 / 17 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fund Approved : | 983,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Status : | Completed | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Completion Date : | 31-12-2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Objectives : |
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| Abstract as per original application (English/Chinese): |
The aim of this project is to explore empirically the important issue of how shareholders in Chinese listed companies exercise their rights to vote.
The power of the shareholders to vote on the affairs of the firm in which they invest is a fundamental concern in corporate governance. Shareholders’ voting rights empower them to elect and remove directors, and to participate in various decision making processes in the firm’s affairs. The conventional wisdom holds that, in the firms where ownership is widely dispersed, minority shareholders are likely to be apathetic in their approach to voting. More recent studies suggest, however, that minority shareholders, in particular, institutional investors, have taken an increasingly activist approach to their voting rights and shown a greater interest in the governance of their invested firms. Although the comparative literature on shareholder voting is rapidly expanding, the manner in which Chinese shareholders vote their shares remains understudied and under-theorized. This project aims to fill this important gap, and to thereby significantly enhance our understanding of corporate governance both in China and more generally.
The project’s particular focus is on non-controlling shareholders in Chinese listed firms, including both individual minority shareholders and institutional investors. Drawing on two unique, hand-collected datasets on shareholder voting in Chinese listed firms, as well as qualitative data on the voting strategies of institutional investors to be obtained with the support a network of collaborating PRC securities regulators, this project will present new insights into, among other things, the patterns in shareholder voting, the determinants of shareholders’ voting behavior, and the impact of shareholder voting on the governance of Chinese listed firms.
It is anticipated that the systematic, empirical and comparative analysis of shareholder voting in China, which this project offers, will inform and help to generate a more grounded theory for understanding the role that shareholder voting plays in the development of national securities markets, with particular reference to China but also more generally. The theoretical and empirical findings of this project will also contribute to better minority shareholder protection in China, as the potential effectiveness of the legal and regulatory reforms aimed at strengthening shareholder rights depends critically on the manner in which shareholders actually exercise those rights.
本課題旨在使用實證方法，研究中國上市公司股東如何行使表決權。 股東通過行使表決權參與公司決策，是公司治理中的重大議題。表決權賦予了股東選舉和罷免董事、參與公司事務決策過程的權利。傳統理論認為，在股權結構分散的公司中，小股東對於表決權的行使往往漠然置之。然而，近來的多項研究表明，以機構投資者為代表的小股東已經越來越積極地行使表決權，並越來越重視公司的治理。儘管對於股東表決制度的比較研究方興未艾，對於中國上市公司股東如何行使表決權的研究尚付諸闕如。本課題嘗試彌補這個領域的研究空白，並希冀從該視角加深對於中國和比較公司治理的研究。 本課題的研究關注重點是中國上市公司的非控股股東，既包括個人中小股東，也包括機構投資者。本課題將通過手動收集資料的方式，構建兩個中國上市公司股東表決資料庫，並且通過與監管機構協作，瞭解機構投資者的表決策略。基於此，本課題嘗試研究股東表決的模式和特徵、股東表決的影響因素、以及股東表決對於中國上市公司治理的影響等重要問題。 本課題將通過對於中國股東表決制度的系統化、實證和比較研究，試圖加深對股東表決制度與股票市場發展之間關係的理論研究。本課題的研究成果還將有助於提升中國上市公司中小股東的法律保護水準。 |
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| Realisation of objectives: | Quantitative and qualitative investigation undertaken under the project has been guided by, and directed to fulfill, its four objectives. All four objectives have been successfully and fully achieved. Objective 1: To articulate the historical, economic and political contexts in which the legal and regulatory framework for shareholder voting rights has evolved in China This component of the project has relied primarily on materials derived from secondary sources. Thus, a unique documentary archive has been created that traces the evolution and functioning of shareholders’ voting rights under Chinese law. This archive collects not only published materials that are more readily accessible (such as monographs, yearbooks, journal articles, and newspaper entries), but also materials that are ‘internal’ in nature, yet are not classified or otherwise confidential. The latter include ‘internal’ policy reports, ‘internal’ policy addresses, as well as ‘internal’ meeting minutes. They are particularly useful for gaining an insight into the academic and policy debates on the case for empowering shareholders by way of enhancing shareholder voting power. These secondary materials are supplemented, importantly, by elite interviews. Interviews have been conducted with senior and rank-and-file officials, both serving and former, at the regulatory bodies who were involved in the development of China’ shareholder voting rights regime. These interviews have shed light on the underlying, often times undocumented, considerations that account for the regulatory initiatives taken on shareholder voting rights, as well as their institutional constraints. Objective 2: To examine empirically the manner in which shareholders in Chinese listed companies exercise their voting rights; and Objective 3: To discern empirically the determinants, as well as the impact, of shareholder voting in Chinese listed firms In order to achieve Objectives 2 and 3, two separate, albeit related, datasets have been constructed, with one focusing on the shareholder voting outcomes at the shareholders’ meetings as disclosed by all Chinese listed firms during the period from 2002 through 2016 (‘Shareholder Voting Dataset’), and the other on the voting records of institutional investors during the course of the so-called “Split-share Structure Reform” that was unfolded from 2005 to 2007 (‘Institutional Investor Dataset’). Elite interviews have also been undertaken to achieve the objectives. The Shareholder Voting Dataset The Shareholder Voting Dataset consists of the voting results on the agenda items that require a vote of the shareholders at the shareholders’ meeting in all Chinese listed firms during the period from 2002 through 2017. It is of note that the period of investigation has been extended by one year to 2017 from 2016 as stated in the approved GRF proposal, in order to more fully capture the recent developments in China’s shareholder voting regime. The Dataset is constructed based on the company disclosures of the shareholder voting results at the shareholders’ meeting. These have been collected from CNInfo, an officially recognised source of information on Chinse listed firms. It provides a broad, near-inclusive coverage of company releases on shareholder voting outcomes. Nevertheless, firms that at the time of data collection are already delisted would no longer have their disclosures available on the website of CNInfo. The absent releases are manually collected from leading Chinese financial news outlets, including the Shanghai Securities Daily and the China Securities Daily, to which the CUHK Library has ready access. The Institutional Investor Dataset The Institutional Investor Dataset contains the proxy voting records of institutional investors from 2005 through 2007, during which time the so-called “Split-share Structure Reform” (“Reform”) was rolled out with a view to transforming the Chinese securities market. During the course of the Reform, Chinese listed companies were required to disclose the identity of their top ten non-controlling shareholders (which were almost invariably institutional investors) and, more importantly, the specific voting records of these shareholders at the special shareholders’ meeting that approved the firm’s reform proposal. The Dataset is constructed based on the company disclosures of those special shareholders meetings, using the same quantitative methods used to create the Shareholder Voting Dataset. It includes additional key quantitative data for the purpose of the research, in particular, the identity of the institutional investors involved, the percentage of share capital each of them represented, and the voting records of each of them. It also contains data on a similar cohort of selected independent variables, including a selected number of portfolio firm and board characteristics that the existing literature has identified as associated with the voting preferences of institutional investors. Elite Interviews Prior empirical research has convincingly documented the institutional investors’ strong preferences for behind-the-scenes, private engagements over public activism. Evidence further suggests that institutional investors engage with their portfolio firms predominantly through private interventions, and that they take public actions only after the behind-the-scenes engagements have not succeeded. The private, confidential nature of the behind-the-scenes interventions means that they usually are unobservable in studies that rely purely on company disclosures. Therefore, in addition to the quantitative data described above, elite interviews have also been carried out to acquire valuable qualitative data that help achieve the objectives 2 and 3. I have interviewed various types of institutional investor, including securities investment funds, private equity funds, pension funds, securities firms, and QDIIs. Interviewees include senior executives of these institutional investors. Lines of questioning include: how, and at what level, are voting policies identified and determined; how are these turned into specific voting decisions; (c) how are target firms for activist engagement and intervention identified and selected; so on and so forth. Interviews have also been conducted to gain a greater understanding of how listed firms have been affected by and have reacted to institutional investor activism, and how they have attempted to influence the voting decision-making of the institutional investors that intend to engage with them on governance issues. The interviewees include not only senior executives of the target firms, but also rank-and-file bureaucrats of the government agency controlling the listed firms concerned (in the case of state-owned firms). Moreover, interviews have been carried out with the CSRC officials, as well the officials of the Shanghai Stock Exchange and the Shenzhen Stock Exchange, who are responsible for the making and enforcement of rules and regulations on shareholder voting. Objective 4: To propose a more grounded theory for understanding the role that shareholder voting plays in the development of national securities markets, with particular reference to China but also more generally. Building on the quantitative and qualitative findings described above, I have been successfully engaged in conceptualization and generalization, and developing a theoretical framework for understanding the institutional constraints for shareholder activism in China and beyond. This endeavour has resulted in: Harpreet Kaur, Chao Xi, Christoph Van del Elst, and Anne Lafarre, Cambridge Handbook on Shareholder Voting and Engagement (Cambridge University Press, 2022 June expected). I co-author the Handbook’s introductory chapter and author its concluding chapter, in addition to my chapter contribution in the Handbook on shareholder voting and engagement in China. | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of objectives addressed: |
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| Research Outcome | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Major findings and research outcome: | Research outputs of the present project include: • A co-edited volume entitled Cambridge Handbook on Shareholder Voting and Engagement (Cambridge University Press, 2022 June expected), covering shareholder voting and engagement in 19 jurisdictions; • Five authored/co-authored chapter contributions to edited volumes published by the Cambridge University Press or Edward Elgar; • Three authored/co-authored articles published in leading/respectable peer-reviewed journals; • Four authored/co-authored articles currently under review by top-ranked/leading peer-reviewed journals; and • 16 conference/seminar presentations and public lectures delivered at international or regional academic events. In addition, two international conferences have been organized under the present project. The major findings of the present project include: • Empowerment of minority shareholders has been a central theme of China’s corporate governance movements in the past two decades. • The practical effect of China’s reforms to strengthen shareholders’ rights to vote needs to be evaluated in the context of China’s path-dependent conditions, notably the prevalence of concentrated share ownership, the relatively weaker presence of institutional investors, and the approach to allocating corporate power which centers on the shareholders meeting. • Empirically, shareholder dissent in China’s listed sector was infrequent, with a large percentage of the resolutions winning the unanimous support of the shareholders who attended. Shareholders seem to have differentiated among different resolution types when casting their votes, lending some support to the thesis that Chinese shareholders are not invariably passive and indifferent. • Empirically, there is a heterogeneity of institutional investors in respect of their stewardship effect. The general restrictions on share transferability had unintended counter-productive effect on investor stewardship in China. • A three-layered conceptual framework might be useful for future comparative research on shareholder voting and engagement. At the center lies the body of shareholder voting laws, essentially a jurisdiction’s web of laws, regulations and rules setting the parameters of shareholders’ voting rights and the ways in which they can exercise these rights. The second layer of the framework relates to engagement tools that transcend the formal, if not mechanical, act of casting votes at the shareholders meeting. The outer right of the framework entails a jurisdiction’s broader ecosystem for voting and engagement. The three layers are closely intertwined, and interact dynamically to shape the way in which laws and corporate practices of shareholder voting and engagement in a given jurisdiction have evolved. | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Potential for further development of the research and the proposed course of action: |
An international network of collaboration is being formed on the basis of the team of leading international experts covering shareholder voting and engagement in 19 jurisdictions who have contributed to the Cambridge Handbook on Shareholder Voting and Engagement (which I co-edit). With necessary institutional and funding support, I plan to take lead in exploring the potential of a multi-jurisdiction, data-driven project on shareholder voting in order to yield new jurisdictional, as well as international and comparative, insights, to supplement the more traditional, doctrinal and anecdotal approaches. | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Layman's Summary of Completion Report: | This project explores empirically the important issue of how shareholders in Chinese listed companies exercise their rights to vote. The power of the shareholders to vote on the affairs of the firm in which they invest is a fundamental concern in corporate governance. The project’s particular focus is on non-controlling shareholders in Chinese listed firms, including both individual minority shareholders and institutional investors. Drawing on two unique, hand-collected datasets on shareholder voting in Chinese listed firms, as well as qualitative data on the voting strategies of institutional investors to be obtained with the support a network of collaborating PRC securities regulators, this project presents new insights into, among other things, the patterns in shareholder voting, the determinants of shareholders’ voting behavior, and the impact of shareholder voting on the governance of Chinese listed firms. The systematic, empirical and comparative analysis of shareholder voting in China, which this project offers, generates a more evidence-based theory for understanding the role that shareholder voting plays in the development of national securities markets, with particular reference to China but also more generally. The theoretical and empirical findings of this project also contribute to better minority shareholder protection in China. | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Research Output | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Peer-reviewed journal publication(s) arising directly from this research project : (* denotes the corresponding author) |
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| Recognized international conference(s) in which paper(s) related to this research project was/were delivered : |
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| Other impact (e.g. award of patents or prizes, collaboration with other research institutions, technology transfer, etc.): |
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| SCREEN ID: SCRRM00542 |