Supervision of not-for-profit minority institutional shareholder and the cost of equity: Evidence from a quasi-natural experiment

Based on the quasi-natural experiment of the shareholding pilot program of China Securities Investor Services Center (CSISC), we construct a difference-in-differences model and find that CSISC shareholding reduces the cost of equity. Channel analyses confirm that CSISC shareholding reduces the cost of equity through optimizing information environment and enhancing stock liquidity. This positive effect is more salient in firms with weaker internal and external governance supervision. Our study has important implications for policy makers to improve investor protection, especially in emerging markets with weak institutional environment.