Does Confucianism Reduce Minority Shareholder Expropriation? Evidence from China
Using a sample of 12,061 firm-year observations from the Chinese stock market for the period of 2001–2011 and geographic-proximity-based Confucianism variables, this study provides strong evidence that Confucianism is significantly negatively associated with minority shareholder expropriation, implying that Confucianism does mitigate agency conflicts between the controlling shareholder and minority shareholders. This finding suggests that Confucianism has important influence on business ethics, and thus can serve as an important ethical philosophy or social norm to mitigate the controlling shareholder’s unethical expropriation behavior. Moreover, my findings reveal that the nature of the ultimate owner attenuates the negative association between Confucianism and minority shareholder expropriation, suggesting that Confucianism’s negative impact on minority shareholder expropriation is less pronounced for state-owned enterprises than for non-state-owned enterprises. The above results are robust to a variety of sensitivity tests and my findings are valid after controlling for the potential endogeneity between Confucianism and minority shareholder expropriation.
KeywordsConfucianism Minority shareholder expropriation The nature of the ultimate owner Other receivables State-owned enterprises Geographic-proximity-based Confucianism variable
- ACGA. (2003). CG watch: Corporate governance in Asia 2003, Asian Corporate Governance Association, Retrieved April 21, 2014 from www.acga-asia.org.
- Ames, R. T. & Rosemont, H (Translators). (1998). Analects of confucius. New York: Ballantine Books.Google Scholar
- Bartik, T. J. (1985). Business location decisions in the United States: Estimates of the effects of unionization, taxes, and other characteristics of states. Journal of Business & Economic Statistics, 3(1), 14–22.Google Scholar
- Berthrong, J. H. (1998). Transformations of the Confucian way. Colorado (U. S.): Westview Press.Google Scholar
- Blackburn, R. (2001). Ethics: A very short introduction. Oxford: Oxford University Press.Google Scholar
- Cavana, P., Delahaye, B., & Ching, K. (2001). Applied business research. Brisbane (Australia): Wiley-IEEE Press.Google Scholar
- Chang, G. (2010). The Confucian view of shame, New York Times. Retrieved November 21, 2013 from http://www.nytimes.com.
- Confucius. (2003a). Analects. (trans: Slingerland, E.). Indianapolis: Hackett Publishing Co.Google Scholar
- Confucius. (2003b). The main concepts of Confucianism. Philosophy.lander.edu. Retrieved October 23, 2013.Google Scholar
- Craig, E. (1998). Routledge encyclopedia of philosophy (Vol. 7). Abingdon (U. K.): Taylor & Francis Group.Google Scholar
- De Bary, W. T., Gluck, C., & Keene, D. (2005). Sources of Japanese tradition: 1600 to 2000 (Vol. 2). New York: Columbia University Press.Google Scholar
- Du, X. (2013b). Does religion mitigate tunneling? Evidence from China. Journal of Business Ethics. doi:10.1007/s10551-013-1917-6.
- Frankel, J. (2011). Rectifying god’s name: Liu Zhi’s Confucian translation of monotheism and Islamic law. Honolulu, Hawaii: University of Hawaii.Google Scholar
- Gannon, M. J. (1994). Understanding global cultures: Metaphorical journeys through 17 countries. Thousand Oaks, CA: Sage Publications.Google Scholar
- Grullon, G., Kanatas, G., & Weston, J. P. (2010). Religion and corporate (mis) behavior. Rice University, Working paper.Google Scholar
- Hofstede, G. H. (1980). Culture’s consequences: international differences in work-related values. Beverly Hills, CA: Sage.Google Scholar
- Hofstede, G. H. (1991). Cultures and organizations. New York: McGraw Hill.Google Scholar
- Hunt, S. D., & Vitell, S. J. (2006). The general theory of marketing ethics: A revision and three questions. Journal of Macro-marketing, 26(2), 1–11.Google Scholar
- Ifeng. (2007). To navigate China with stable development via Confucianism. Retrieved April 21, 2014 from http://news.ifeng.com/world/usa/200712/1221_1394_339384.shtml.
- Ifeng. (2013). Xi Jinping visited Confucian temple in Qufu of Shandong Province and thumbed Confucian classics. Retrieved April 21, 2014 from http://news.ifeng.com/mainland/xijinping/detail_2013_11/26/31575598_0.shtml.
- Ifeng. (2014). President Xi Jinping met Master Hsing Yun. Retrieved on March 31, 2014 from http://news.ifeng.com/taiwan/3/detail_2014_02/19/33971288_0.shtml.
- Jiang, J. P. L. (1987). Confucianism and modernization: A symposium. Taipei (China): Freedom Council Press.Google Scholar
- Kidder, R. M. (2003). How good people make tough choices: resolving the dilemmas of ethical living. New York: Harper.Google Scholar
- Kim, Y.-G. (2002). The Confucian-Christian context in Korean Christianity. B.C. Asian Review (University of British Columbia Press) 13, 70–91.Google Scholar
- Lew, W. J. F. (1979). A Chinese woman intellectual: Family, education, and personality. Educational Journal, 11, 36–46.Google Scholar
- Li, T., & Moreira, G. O. (2014). The influence of Confucianism and Buddhism on Chinese Business. Working paper. Retrieved on July 8, 2014 from http://www.immi.se/intercultural/nr19/tianbo.htm.
- Lin, J. Y., Cai, F., & Li, Z. (1998). Competition, policy burdens, and state-owned enterprise reform. American Economic Review, 88(2), 422–427.Google Scholar
- Liu, S.-H. (1998). Understanding confucian philosophy: Classical and Sung-Ming. New York: Greenwood Press.Google Scholar
- Meng, P. (2004). Relationship between man and nature in traditional human rights concepts of China and West, magazine of the China society for human rights studies, Retrieved November 21, 2013 from http://humanrights.cn/zt/magazine/200402004811100410.htm.
- Peng, W., Wei, K. C. J., & Yang, Z. (2006). Tunneling or propping: evidence from connected transactions in China. Working paper.Google Scholar
- Raju, P. T. (1992). Introduction to comparative philosophy. Evanston, Illinois: Northwestern University Press.Google Scholar
- Rising, B. (2000). SPHDIST: Stata module to compute spherical distances. Statistical software components S372502 (Boston College Department of Economics). Retrieved November 21, 2013 from http://ideas.repec.org/c/boc/bocode/s372502.html#refs.
- Rosemont, H. (2005). Lecture, Providence, Rhode Island: Brown University.Google Scholar
- Runes, D. D. (1983). Dictionary of Philosophy. New York: Philosophical Library.Google Scholar
- Spooner, W. A. (1994). The Golden Rule. In James. Hastings (Ed.), Encyclopedia of religion and ethics (Vol. 6). New York: Charles Scribner’s Sons.Google Scholar
- Stace, W. T. (1937). The concept of morals. New York: The MacMillan Company.Google Scholar
- Tan, J. Y. (1967). Confucianism and neo-Confucianism. In New. Catholic (Ed.), Encyclopedia: an international work of reference on the teachings, history, organization and activities of the Catholic Church, and on all institutions, religions philosophies and scientific and cultural developments affecting the Catholic Church from its beginning to the present. New York: McGraw-Hill Book.Google Scholar
- Time. (2007). Person of the year 2007. Time, 176 (51). Retrieved June 20, 2014, from http://content.time.com/time/specials/2007/personoftheyear/0,28757,1690753,00.html.
- Tu W.-M. (1985). Confucian thought: Selfhood as creative transformation. Albany, New York: State University of New York Press.Google Scholar
- Weaver, G. R., & Agle, B. R. (2002). Religiosity and ethical behavior in organizations: A symbolic interactionist perspective. Academy of Management Review, 27(1), 77–97.Google Scholar
- White, H. (1980). A heteroskedasticity-consistent covariance estimator and a direct test for heteroskedasticity. Econometrica, 48(4), 817–838.Google Scholar
- Wooldridge, J. M. (1995). Score diagnostics for linear models estimated by two stage least squares. In G. S. Maddala, P. C. B. Phillips, & T. N. Srinivasan (Eds.), Advances in econometrics and quantitative economics: Essays in honor of professor Rao C. R (pp. 66–87). Oxford: Blackwell.Google Scholar
- Yi, S.-H. (2006). A topography of Confucian discourse. New Jersey: Homa & Sekey Books.Google Scholar