Minority Shareholder Activism (MSA) is all the rage. Fans claim it’s making a difference in Japan and no self-respecting institutional manager can make a pitch now without a few paragraphs devoted to the subject.
The paper highlighted this week is therefore of interest in this context. In the work Han Han and Zhibin Wang of the Peking University take a look at how not big institutions but small-fry can affect the dividend paying habit of companies listed on the Shanghai and Shenzhen exchanges.
Both exchanges set up online postboards* (Shenzhen in 2010, Shanghai in 2013) where investors can directly address listed companies with queries. The exchanges expect companies to respond to these inquiries and grades them with scores for good behavior.
[*A great idea for Hong Kong, if moderated intelligently. HKEX friends, please note]
It was therefore a relatively easy job for the researchers to drill the postings (from 2010 to 2020) and see if minority whinging about dividends led to companies actually doing anything constructive in that regard.
The results are, in my opinion and for practitioners, ambiguous. The researchers believe they’ve proved a link and they’ve done a good job of trying to make sure results are robust and unaffected by other variables.
But here’s the rub. Having done the work and satisfied themselves there’s a connection this is what they have to say about the size of the effect “..the presence of MSA is associated with about a two-percentage-point increase in the likelihood of paying dividends.”
I can’t prove politeness, being kind to animals or flipping a charity a few bucks from time to time are necessarily good things, but I believe nonetheless these activities are to be encouraged.
In the same way the absence of robust proof that MSA is effective shouldn’t discourage its practice. It surely can’t do any harm; but I’m not sure this paper is the proof of efficacy managers should be referencing in future presentations.
The work can be accessed in full via the following link Minority Shareholder Activism and Corporate Dividend Policy.
Happy Sunday.