The mechanisms of institutional activism: qualified foreign institutional investors in China

Key points: - This article examines the mechanisms available to institutional investors in China, especially Qualified Foreign Institutional Investors (QFIIs), that may allow them to engage in activism in publicly traded corporations. - The presumption behind China’s QFIIs policy is that foreign institutional investors will engage in activism and improve the corporate governance of Chinese listed companies. - The article explores the mechanisms available to QFIIs and identifies the extent to which they have the capacity or potential capacity to engage in shareholder activism. - The article concludes that QFIIs could potentially form shareholder consortia. However, based on Shapley-Shubik and Banzhaf-Coleman indices which measure QFIIs’ voting power, it further concludes that QFIIs do not have the capacity or even the potential capacity to form shareholder consortia with sufficient weight to engage in activism.