Does minority shareholder activism impede corporate default risk? Evidence from China

Different from the majority of research studying minority shareholder activism (MSA) on shareholder side, this study investigates the impact of MSA from the perspective of creditors. Based on annual data of listed firms on SSE and SZSE from 2010 to 2020, we find that MSA significantly mitigates corporate default risk through two ways: the “supervision” way and “good advice” way. Such inhibitory effect is strengthened by favorable institutional environment, board secretary concurrently serving as other executives, and board secretary response. Furthermore, we find that the supervision role of MSA is substitution for those of analysts and institutional investors. Our findings provide evidence for strengthening the protection of minority shareholders and encouraging their participation in firm affairs.