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2371Using the data of listed companies and adopting the DID approach, this paper finds that the shareholding pilot program of China Securities Investor Services Center (ISC) helps to curb corporate violations. Compared with the listed companies in non-pilot areas, the probability and frequency of violations of the listed companies in pilot areas have been significantly reduced. The mediating effect analysis shows that, ISC curbs corporate violations by restraining the opportunistic behavior of major shareholders and encouraging minority shareholders to participate in corporate governance. Media coverage and ISC shareholdings will complement each other in curbing corporate violations. Further research finds that, ISC shareholdings have an inhibitory effect on corporate violations relating to both information disclosure and non-information disclosure. Compared with common violations, the inhibitory effect is more pronounced on serious violations. When the scope is expanded to the whole country, there is no significant difference between the violations of the treatment group and the control group. The inhibitory effect of ISC shareholdings on corporate violations diminishes over time.
This paper may have the following contributions: (1) It contributes to the literature on the protection of minority shareholders and provides references for emerging economies wishing to improve investor protection. (2) It supplements the research on minority shareholder activism emerging in recent years. (3) It provides theoretical support and empirical evidence for the effectiveness of investor protection by ISC, extending the literature on the consequence of ISC shareholdings. (4) It enriches the research on the factors influencing corporate violations from the perspective of ISC, which is a new type of external governance mechanism.
