Majority shareholders who divert assets from one company to another for personal benefit can be found in some developing nations, robbing companies of value and even forcing them to be delisted from stock exchanges
What happens when a company is robbed by its dominant shareholder?
The theft not only hurts minority shareholders, but profoundly damages the firm's longer-term health and viability, according to Charles M.C. Lee, an accounting professor at Stanford's Graduate School of Business. In a recent research paper, Lee and two Peking University scholars examined such insider abuse in an increasingly important market: China.
This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)