This article examines how small shareholders protected their interests from large shareholders’ expropriation by forming an alliance and taking collective action to block a convertible bonds issue by a Chinese bank that they considered harmful. Forming an alliance strengthened small shareholders’ network density, enhanced their salience (power, legitimacy, and urgency), and reduced the bank's centrality. This enabled small shareholders to change their strategy from being a subordinator to a compromiser and forced the controlling shareholders and their representatives to change their strategy from a commander to a compromiser. Apart from interest-based motives, the alliance provided small shareholders with identity-based incentives to persistently oppose expropriation by controlling shareholders. This article enriches the literature on small shareholder activism and principal-principal problem.
