nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

06.04.2020 | Original Research

Identity of multiple large shareholders and corporate governance: are state-owned entities efficient MLS?

verfasst von: Sen Lin, Fengqin Chen, Lihong Wang

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 4/2020

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper empirically investigates how the identity of multiple large shareholders (MLS) affects principal-agent and principal–principal conflicts of interests in Chinese listed privately controlled firms during 2006–2017, by distinguishing between state-owned and non-state-owned MLS. We find that the presence of non-state-owned MLS significantly mitigates the principal-agent conflict of interests as manifested in a lower selling, general, and administrative expenses scaled by total sales (SG&A ratio) of Chinese listed privately controlled firms. However, this effect is not observed when state-owned entities serve as MLS. Although we do not observe a strong impact of non-state-owned MLS in reducing principal–principal conflict of interests, i.e., a lower ratio of related-party transactions (RPT), the presence of financial non-state-owned MLS helps to alleviate RPT in Chinese listed privately controlled firms. Conversely, state-owned MLS do not mitigate principal–principal conflict of interests but worsen it, as evidenced by a higher ratio of RPT. Additionally, the presence of state-owned MLS is associated with a large magnitude of overinvestment by and increased government subsidies to Chinese listed privately controlled firms. Finally, the entry of non-state-owned MLS enhances the performance of these firms, while the presence of state-owned MLS does not engender a performance-enhancement effect.

Vorheriger Artikel Volatility and asymmetric dependence in Central and East European stock markets

Nächster Artikel Government control and the value of cash: evidence from listed firms in China

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

For example, Maury and Pajuste (2005) analytically suggest that it is less likely for financial institutions to collude with family controlling shareholder because the cost of getting caught for private benefit extraction is extremely high for financial institutions, such as the heavy loss of reputation and the strict ex ante responsibility they have.

As an example, Attig et al. (2013) show that the presence of the state as the second largest shareholder is not associated with an effective monitoring of the controlling shareholder, which aims to enhance the valuation of cash holding. They attribute this finding to outside investors’ perception of the potential misuse of excess cash when the government is one of the large shareholders; however, they but do not conduct an in-depth investigation of this matter.

In September 2015, the Central Committee of the Communist Party of China and the State Council issued the Opinions on Deepening the Reform of State-Owned Enterprises, which proposed “promoting the reform of mixed ownership to amplify the function of state-owned capital and to improve the efficiency of state-owned assets.” This reform not only encourages state-owned enterprises to introduce non-state-owned capital but also pushes state-owned capital to invest in privately controlled firms.

Cheung et al. (2010) classify related-party transactions into three categories: (1) transactions that are a priori likely to result in the expropriation of the listed firm’s minority shareholders; (2) transactions likely to benefit the listed firm’s minority shareholders; 3) transactions that could have strategic rationales and perhaps are not expropriation.

The outcomes of all additional tests that are discussed but not shown in the paper can be obtained from the authors upon request.

Agrawal A, Knoeber CR (2001) Do some outside directors play a political role? J Law Econ 44(1):179–198. https://doi.org/10.1086/320271CrossRef

Ang JS, Cole RA, Lin JW (2000) Agency costs and ownership structure. J Finance 55(1):81–106. https://doi.org/10.1111/0022-1082.00201CrossRef

Attig N, Guedhami O, Mishra D (2008) Multiple large shareholders, control contests, and implied cost of equity. J Corp Finance 14(5):721–737. https://doi.org/10.1016/j.jcorpfin.2008.08.008CrossRef

Attig N, Ghoul SE, Guedhami O, Rizeanu S (2013) The governance role of multiple large shareholders: evidence from the valuation of cash holdings. J Manag Gov 17(2):419–451. https://doi.org/10.1007/s10997-011-9184-3CrossRef

Barroso CR, Burkert M, Dávila A, Oyon D (2016) Shareholder protection: the role of multiple large shareholders. Corp Gov Int Rev 24(2):105–129. https://doi.org/10.1111/corg.12131CrossRef

Belghitar Y, Clark E, Saeed A (2019) Political connections and corporate financial decision making. Rev Quant Finance Account 53(4):1099–1133. https://doi.org/10.1007/s11156-018-0776-8CrossRef

Bennedsen M, Wolfenzon D (2000) The balance of power in closely held corporations. J Financ Econ 58(1):113–139. https://doi.org/10.1016/S0304-405X(00)00068-4CrossRef

Berkman H, Cole RA, Fu LJ (2010) Political connections and minority-shareholder protection: evidence from securities-market regulation in China. J Financ Quant Anal 45(06):1391–1417. https://doi.org/10.1017/S0022109010000608CrossRef

Boateng A, Huang W (2017) Multiple large shareholders, excess leverage and tunneling: evidence from an emerging market. Corp Gov Int Rev 25(1):58–74. https://doi.org/10.1111/corg.12184CrossRef

Boubaker S, Sami H (2011) Multiple large shareholders and earnings informativeness. Rev Account Finance 10(3):246–266. https://doi.org/10.1108/14757701111155789CrossRef

Chaney PK, Faccio M, Parsley D (2011) The quality of accounting information in politically connected firms. J Account Econ 51(1–2):58–76. https://doi.org/10.1016/j.jacceco.2010.07.003CrossRef

Chen X, Lee CWJ, Li J (2008) Government assisted earnings management in China. J Account Public Policy 27:262–274. https://doi.org/10.1016/j.jaccpubpol.2008.02.005CrossRef

Chen YC, Hung M, Wang Y (2018) The effect of mandatory CSR disclosure on firm profitability and social externalities: evidence from China. J Account Econ 65(1):169–190. https://doi.org/10.1016/j.jacceco.2017.11.009CrossRef

Cheung YL, Rau PR, Stouraitis A (2010) Helping hand or grabbing hand? Central vs. local government shareholders in Chinese listed firms. Rev Finance 14(4):669–694. https://doi.org/10.1093/rof/rfp024CrossRef

Claessens S, Djankov S, Lang LHP (2000) The separation of ownership and control in East Asian corporations. J Financ Econ 58(1–2):81–112. https://doi.org/10.1016/S0304-405X(00)00067-2CrossRef

Cull R, Xu L (2005) Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms. J Financ Econ 77(1):117–146. https://doi.org/10.1016/j.jfineco.2004.05.010CrossRef

Defond ML, Hung M, Li S, Li Y (2015) Does mandatory IFRS adoption affect crash risk? Account Rev 90(1):265–299. https://doi.org/10.2308/accr-50859CrossRef

Ding S, Jia C, Wilson C, Wu Z (2015) Political connections and agency conflicts: the roles of owner and manager political influence on executive compensation. Rev Quant Finance Account 45(2):407–434. https://doi.org/10.1007/s11156-014-0441-9CrossRef

Dong XY, Putterman L (2003) Soft budget constraints, social burdens and labor redundancy in China’s state industry. J Comp Econ 31(1):110–133. https://doi.org/10.1016/S0147-5967(02)00012-4CrossRef

Faccio M, Masulis RW, Mcconnell JJ (2006) Political connections and corporate bailouts. J Finance 61(6):2597–2635. https://doi.org/10.1111/j.1540-6261.2006.01000.xCrossRef

Huang W (2016) Tunneling through related-party loan guarantees: evidence from a quasi-experiment in China. Rev Quant Finance Account 47(3):857–884. https://doi.org/10.1007/s11156-015-0523-3CrossRef

Jara-Bertin M, López-Iturriaga FJ, López-de-Foronda Ó (2008) The contest to the control in european family firms: how other shareholders affect firm value. Corp Gov Int Rev 16(3):146–159. https://doi.org/10.1111/j.1467-8683.2008.00677.xCrossRef

Jiang F, Cai W, Wang X, Zhu B (2018) Multiple large shareholders and corporate investment: evidence from China. J Corp Finance 50((C)):66–83. https://doi.org/10.1016/j.jcorpfin.2018.02.001CrossRef

La Porta R, Lopez-De-Silanes F, Shleifer A (1999) Corporate ownership around the world. J Finance 54(2):471–517. https://doi.org/10.1111/0022-1082.00115CrossRef

Laeven L, Levine R (2008) Complex ownership structures and corporate valuations. Rev Financ Stud 21(2):579–604. https://doi.org/10.1093/rfs/hhm068CrossRef

Lee W, Wang L (2017) Do political connections affect stock price crash risk? Firm-level evidence from China. Rev Quant Finance Account 48(3):643–676. https://doi.org/10.1007/s11156-016-0563-3CrossRef

Lin JY, Cai F, Li Z (1998) Competition, policy burdens, and state-owned enterprise reform. Am Econ Rev 88(2):422–427

Lin TJ, Tsai HF, Imamah N, Hung JH (2016) Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China. Pac Basin Finance J 40:173–190. https://doi.org/10.1016/j.pacfin.2016.10.007CrossRef

Maury B, Pajuste A (2005) Multiple large shareholders and firm value. J Bank Finance 29(7):1813–1834. https://doi.org/10.1016/j.jbankfin.2004.07.002CrossRef

Mishra DR (2011) Multiple large shareholders and corporate risk taking: evidence from East Asia. Corp Gov Int Rev 19(6):507–528. https://doi.org/10.1111/j.1467-8683.2011.00862.xCrossRef

Pagano M, Roell A (1998) The choice of stock ownership structure: agency costs, monitoring, and the decision to go public. Q J Econ 113(1):187–225. https://doi.org/10.1162/003355398555568CrossRef

Petersen M (2009) stimating standard errors in finance panel data sets: comparing approaches. Rev Financ Stud 22(1):435–480. https://doi.org/10.1093/rfs/hhn053CrossRef

Qian Y (1996) Enterprise reform in China: agency problems and political control. Econ Transit 4(2):427–447. https://doi.org/10.1111/j.1468-0351.1996.tb00181.xCrossRef

Qiang Q (2003) Corporate governance and state-owned shares in China listed companies. J Asian Econ 14:771–783. https://doi.org/10.1016/j.asieco.2003.10.005CrossRef

Richardson S (2006) Over-investment of free cash flow. Rev Account Stud 11(2–3):159–189. https://doi.org/10.1007/s11142-006-9012-1CrossRef

Rosenbaum PR, Rubin DB (1984) Reducing bias in observational studies using subclassification on the propensity score. J Am Stat Assoc 79(387):516–524. https://doi.org/10.1080/01621459.1984.10478078CrossRef

Shleifer A, Vishny RW (1986) Large shareholders and corporate control. J Polit Econ 94(3–1):461–488. https://doi.org/10.1086/261385CrossRef

Singh M, Davidson WN III (2003) Agency costs, ownership structure and corporate governance mechanisms. J Bank Finance 27(5):793–816. https://doi.org/10.1016/S0378-4266(01)00260-6CrossRef

Volpin PF (2002) Governance with poor investor protection: evidence from top executive turnover in Italy. J Financ Econ 64(1):61–90. https://doi.org/10.1016/S0304-405X(02)00071-5CrossRef

Wei Z, Xie F, Zhang S (2005) Ownership structure and firm value in China’s privatized firms: 1991–2001. J Financ Quant Anal 40(1):87–108. https://doi.org/10.1017/S0022109000001757CrossRef

Zwiebel J (1995) Block investment and partial benefits of corporate control. Rev Econ Stud 62(2):161–185. https://doi.org/10.2307/2297801CrossRef

Titel: Identity of multiple large shareholders and corporate governance: are state-owned entities efficient MLS?
verfasst von: Sen Lin
Fengqin Chen
Lihong Wang
Publikationsdatum: 06.04.2020
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 4/2020
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-020-00875-z

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 4/2020

Government control and the value of cash: evidence from listed firms in China

Impact of economic policy uncertainty on disclosure and pricing of earnings news

When enough is not enough: bank capital and the Too-Big-To-Fail subsidy

Wealth effects of relative firm value in M&A deals: reallocation of physical versus intangible assets

Volatility and asymmetric dependence in Central and East European stock markets

A machine learning approach to univariate time series forecasting of quarterly earnings