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

Abstract

Despite being the world’s second largest economy, shareholder activism in China remains largely unexplored. Using unique hand-collected data, we reveal that shareholder activism in China is thriving, with 156 major campaigns identified from 2007-2023, over two-thirds occurring in the last five years.

Contrary to Western assumptions, our empirical analysis finds no statistically significant difference in activist campaign success rates between state-owned enterprises (SOEs) and privately-owned enterprises (POEs). Private shareholders have successfully conducted activist campaigns against powerful state-owned “national champions” in over half of the cases. Conversely, over half of the campaigns by state-owned activists failed when targeting POEs.

Our regression analyses, coding activists and targets based on political power, suggest China has developed a rules-based market for shareholder activism with no evidence of systemic political interference, even when state actors are involved. In-depth case studies further support this conclusion, while illuminating rare instances where political influence may play a role in sensitive cases involving national champions.

This overlooked rise of rules-based shareholder activism in China challenges prevailing Western narratives and provides new insights into Chinese corporate governance. Our findings suggest shareholder activism is emerging as an important force shaping governance practices in the world's second largest shareholder market. This research is particularly timely and important as the influence of the Chinese Communist Party over Chinese corporate governance has become a major issue in the United States and of global significance.