Firms with short-termism: Evidence from expatriate controlling shareholders

We use controlling shareholders' emigration data in Chinese non-state-owned enterprises (non-SOEs) listed on stock exchanges in China to investigate the effect of changes in their residency status on firm behavior. Environmental concerns, including low-quality education, medical services, and adverse business conditions for non-SOEs, are important drivers of emigration. These firms engage in short-term investments by holding cash, real estate, and financial assets, targeting short-term earnings growth, and reducing long-term investments, such as corporate social responsibility activities and innovation through R&D and patents. The negative effect of emigration by a controlling shareholder on corporate innovation is weaker for firms with good internal and external corporate governance. Our research highlights the importance of emigration by controlling shareholders in long-term corporate development and offers policy implications for policymakers and investors in emerging markets.