Expropriation: Evidence from Rights Issues in China

This paper examines the expropriation of tradable shareholders in rightsissuing firms with the split share structure in China. Using a sample of 444 rights issues from 1999 to 2004, we find that the change in wealth of tradable shareholders is negatively correlated with the change in wealth of nontradable shareholders, consistent with an expropriation effect. Additional evidence indicates that the expropriation effect in rights issues is exacerbated when the firm is not ultimately controlled by the government, the nontradable shareholders do not subscribe the shares of rights issues, or the firm has a large second-largest shareholder.