EFFECT OF COMMON INSTITUTIONAL OWNERSHIP ON TUNNELING: EMPIRICAL EVIDENCE FROM CHINAThis study examines the role of common institutional ownership (CIO) in reducing the tunneling behavior of controlling shareholders in Chinese listed companies. We empirically examined the influence of CIO on tunneling using a multiple regression model. The results show that CIO restrains tunneling, and the impact intensifies with an increase in CIO and a higher shareholding ratio. This effect is more pronounced in firms with poor information environments, low external supervision, non-state ownership, and a high degree of separation between ownership and control. We find that common institutional investors alleviate tunneling by using information advantage and engaging in shareholder activism. These results offer new evidence of the effect of common institutional investors on controlling shareholders’ behavior.
Keywords:
common institutional ownership; tunneling; information advantage; shareholder activism; China
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Note: This figure shows the result of a placebo test to exclude the influence of unobservable random disturbances on tunneling. We set a falsified variable of CIO1 using a simulation method of randomly assigning values to the firms in the treatment group. The process is repeated 1,000 times to ensure that the placebo test can effectively identify causality. 