Multiple large shareholders and controlling shareholders' related-party M&As

This paper examines the impact of a common ownership structure - multiple large shareholders (MLS) - on controlling shareholders' related-party mergers and acquisitions (M&As). Using a sample of 2,923 Chinese listed firms from 2003 to 2018, we find that firms with MLS are less likely to initiate controlling shareholders' related-party M&As and if they do, pay lower M&A premium. Further tests show that the impact of MLS on controlling shareholders' related-party M&As is more prominent when the relative power of other blockholders is stronger, when MLS are of different identity, when corporate governance mechanism is weaker, and when the agency conflicts are more severe. We also find that the presence of MLS is associated with higher related-party M&A performance. Our results imply that MLS monitor the controlling shareholder and improve governance, and hence restrain related-party M&As.