Strong shareholder rights, internal capital allocation efficiency, and the moderating role of market competition and external financing needs

Protection of Minority Shareholder Investment in the Small and Medium-sized Enterprises

“…This is because the protection of minority shareholders is beneficial for monitoring managers who protect their self-interests by not paying out dividends, or transferring profits to other companies they control. Good protections provide the effective management and strong operational capabilities, which increase higher cash-flow rights and higher capital gains from their investment (Shleifer & Vishny, 1997;Sturm & Nüesch, 2019). There is an expropriation of minority shareholder rights through the pursuit of nonprofitmaximizing objectives by large investors who are also managers (Controlling shareholders).…”

“…There is an expropriation of minority shareholder rights through the pursuit of nonprofitmaximizing objectives by large investors who are also managers (Controlling shareholders). Investing in these companies are unattractive to small shareholders and their shares are valued less relative to their corporate market valuation (Sturm & Nüesch, 2019). That is why firms with greater controlling shareholders normally created higher control rights that have an insignificant or negative effect on shareholder's market valuation (Sturm & Nüesch, 2019)…”

“…The result shows the growth of share market price supports shareholders' wealth maximization, which safeguards the protection of minority shareholder investment. This is because non-controlling shareholders encourage corporate governance that increases the wealth of shareholders by maximising shareholder wealth (Sturm & Nüesch, 2019). Corporate governance safeguards non-controlling shareholders protection because they have the power to monitor management, which limits insidertrading of controlling shareholders (Croci & Petmezas, 2010).…”