Decisions Made by the Controlling Shareholder Under Financial Crisis |
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Authors: | Huajie Liang |
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Institution: | School of Economics and Commerce, South China University of Technology, The University Town of Guangzhou, Guangdong Province, P. R. China |
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Abstract: | We employ a sample of 12,200 observations from 2,321 companies listed on the Shanghai and Shenzhen Stock Exchanges in China between 2005 and 2013 to test five hypotheses. The empirical results show that the cost of tunneling and ownership structure play important roles in restraining incentives to expropriate firms. Financial crisis will reinforce the incentive to propping rather than tunneling with higher ownership concentration. Moreover, controlling shareholders of state-owned enterprises show a stronger motivation to prop up during crisis periods than do those of non-state-owned enterprises. The results indicate that both an entrenchment effect and a convergence-of-interest effect actually exist and vary according to ownership structure and macroeconomic circumstances. |
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Keywords: | controlling shareholder financial crisis ownership structure propping tunneling |
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