The effects of the split share structure reform on Chinese listed firms' leverage decisions

Han Fang Tsai; Tsui Jung Lin; Jung Hua Hung

doi:10.1016/j.qref.2014.10.003

The effects of the split share structure reform on Chinese listed firms' leverage decisions

Han Fang Tsai, Tsui Jung Lin, Jung Hua Hung

Department of Business Administration

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

This paper examines the effects of China's split share structure reform on the leverage decisions of listed firms. The results show that there are two effects, multiple large shareholders and liquidity that affect the leverage ratio. In non-state controlled firms, multiple large shareholders are able to monitor the controlling shareholders which reduce the leverage ratio. However, in state-controlled firms, they collude with the controlling shareholders to expropriate through debt financing. State ownership plays a decisive role in driving multiple large shareholders to collude with the controlling shareholders.

Original language	English
Pages (from-to)	86-100
Number of pages	15
Journal	Quarterly Review of Economics and Finance
Volume	57
DOIs	https://doi.org/10.1016/j.qref.2014.10.003
State	Published - 1 Aug 2015

Keywords

Leverage ratio
Liquidity
Multiple large shareholders
Split share structure reform

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title = "The effects of the split share structure reform on Chinese listed firms' leverage decisions",

abstract = "This paper examines the effects of China's split share structure reform on the leverage decisions of listed firms. The results show that there are two effects, multiple large shareholders and liquidity that affect the leverage ratio. In non-state controlled firms, multiple large shareholders are able to monitor the controlling shareholders which reduce the leverage ratio. However, in state-controlled firms, they collude with the controlling shareholders to expropriate through debt financing. State ownership plays a decisive role in driving multiple large shareholders to collude with the controlling shareholders.",

keywords = "Leverage ratio, Liquidity, Multiple large shareholders, Split share structure reform",

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N2 - This paper examines the effects of China's split share structure reform on the leverage decisions of listed firms. The results show that there are two effects, multiple large shareholders and liquidity that affect the leverage ratio. In non-state controlled firms, multiple large shareholders are able to monitor the controlling shareholders which reduce the leverage ratio. However, in state-controlled firms, they collude with the controlling shareholders to expropriate through debt financing. State ownership plays a decisive role in driving multiple large shareholders to collude with the controlling shareholders.

AB - This paper examines the effects of China's split share structure reform on the leverage decisions of listed firms. The results show that there are two effects, multiple large shareholders and liquidity that affect the leverage ratio. In non-state controlled firms, multiple large shareholders are able to monitor the controlling shareholders which reduce the leverage ratio. However, in state-controlled firms, they collude with the controlling shareholders to expropriate through debt financing. State ownership plays a decisive role in driving multiple large shareholders to collude with the controlling shareholders.

KW - Leverage ratio

KW - Liquidity

KW - Multiple large shareholders

KW - Split share structure reform

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JO - Quarterly Review of Economics and Finance

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The effects of the split share structure reform on Chinese listed firms' leverage decisions

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Keywords

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