Can a not-for-profit minority institutional shareholder make a difference in stock liquidity? A quasi-natural experiment

The protection of retail investors has long been a key issue in global capital markets. The China Securities Investor Service Centre (CSISC) is a non-profit, quasi-governmental organisation capable of providing tangible assistance to retail investors. This paper examines the impact of the CSISC’s exercise of rights on stock liquidity. Research evidence indicates that CSISC’s exercise of shareholder rights not only helps to promote information disclosure but also significantly enhances stock liquidity, with the impact being particularly pronounced when such exercise takes the form of participation in general meetings and online enquiries. Furthermore, the effects of CSISC’s activities are more pronounced in non-state-owned enterprises, enterprises with government-enterprise linkages, enterprises subject to enquiries by other regulatory bodies, and in regions with well-developed legal systems and higher levels of marketisation. The exercise of CSISC’s rights also prompts enterprises to disclose adverse information through internal and external governance mechanisms. This study demonstrates the policy effectiveness of CSISC’s participation and highlights its crucial role in improving corporate governance practices.