The signalling role of a regulatory minority shareholder exercising rights: Evidence from firm's bank loans

This study investigates the impact of the China Securities Investor Services Center (CSISC) exercising minority shareholder rights on corporate bank loans, revealing that CSISC actions have spillover effects on firm financing. Using a staggered difference-in-differences approach and analyzing data from Chinese listed companies between 2013 and 2021, we find that the CSISC exercises minority shareholder rights, reducing bank loans for the companies affected. This effect is more pronounced in firms with weaker corporate governance structures and higher reputational risks. Further analysis shows that disclosures by the CSISC involving corporate finance or corporate governance structures shrink enterprises' access to bank loans and change the structure of corporate bank loans. Our findings have valuable policy implications for emerging markets, highlighting the need for enhanced regulatory frameworks to protect minority shareholders and mitigate corporate governance risks.