Non‐controlling Large Shareholders and Firm Performance in China

This paper examines the determination of non‐controlling large shareholders ( NCLS s) on firm performance and investigates the impacts of NCLS s on tunneling and investment efficiency. We use three attributes of NCLS s (ownership, identity, and relational board/management representation) to fully capture the governance effects of NCLS s. We find robust evidence that NCLS s are associated with higher firm performance. Furthermore, we also document that NCLS s promote investment efficiency. However, except for individual investors, the other items in NCLS s deteriorate tunneling. Additionally, except for mutual funds, we find that the other governance effects of NCLS s are stable under different circumstances.