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| “Monitoring Managers” or “Restricting Tunneling”？ The Effect of Fund' s Holding on Firm Value in China |
| ZENG Zhiyuan, CAI Dongling, WU Xiaokai
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| School of Economics/Research Institute of Economics and Management,Southwestern University of Finance and Economics |
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Abstract This paper empirically tests the impact of fund ownership by using the data of China' s non-financial listed firms during the period of 2009-2017, and compares two mechanisms, “monitoring managers” or “restricting tunneling”. We find that: (1) the equity ownership by funds has a significant positive effect on listed firms' value, and the effect is stronger in firms where the controlling shareholders held a higher proportion of stock; (2) not only active and passive funds significantly increase the firms' value, quasi index funds also increase the firms' value; (3)the number of funds holding stock in the firm can significantly enhance the firm value, while the impact of fund ownership significantly decreases when controlling the number of funds. These results suggest the main contributing mechanism of the fund in China is more likely to be restricting the controlling shareholder's expropriation, instead of monitoring managers.
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Received: 13 December 2017
Published: 22 January 2019
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