The Overlooked Reality of Shareholder Activism in China: Defying Western Expectations

Despite shareholder activism being in the global spotlight, shareholder activism in China – the world’s second largest economy – remains largely a black box. Using unique hand collected data, we reveal the overlooked reality that shareholder activism in China is thriving – with 156 major shareholder activist campaigns, over two-thirds of which have occurred in the last five years. 

Contrary to Western conventional wisdom, we find that whether the target company is a private owned enterprise (POE) or state-owned enterprise (SOE), has no statistically significant effect on the success of activist campaigns. Private shareholders have undertaken, and in over half of the cases succeeded, in activist campaigns against so called “national champions” – the name bestowed on the largest, most politically powerful, SOEs in China. Conversely, over half of the activist campaigns launched by national champions failed when the target was a POE. Taken together, virtually all our empirical evidence, including our regression analyses in which we coded shareholder activists and target companies based on their level of political power, suggests that China has developed a rules-based market for shareholder activism – in which there is no evidence of systemic political interference (even when the state is the shareholder activist or target company). 

To further interrogate the role that politics may play in individual politically sensitive cases, we drilldown into our empirical evidence and analyze our unique collection of shareholder activist case studies. Despite our in-depth analysis to try to find evidence of political interference, our empirical and case study evidence of the heretofore unreported surge of shareholder activism in China suggests that it has been primarily driven by rules-based market forces.