Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China

This paper examines the effect of ownership structure on the value of corporate excess cash holdings with consideration of the existence of multiple large shareholders (MLS) and the impact of the split share structure reform. The sample is comprised of information on Chinese listed companies from 2004 to 2011. The empirical results indicate that the presence of MLS increases the value of excess cash holdings, however, this effect exists only in OwnG group, where government is the controlling shareholder and the main MLS (the second largest shareholder) is a non-government entity (local institutional investor or foreign institutional investor). When the impact of the split share structure reform is taken into consideration, this reform enhances the monitoring of MLS in OwnG group and increases the value of excess cash holdings, especially when the contestability of control between the controlling shareholder and MLS becomes stronger. Our results imply that in this unique capital market of China, MLS play a valuable monitoring role in firms with more severe agency problems and when the contestability of control is stronger, especially after the split structure reform.