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Bank shareholding and corporate cash management: Evidence from China

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  • Zhang, Huili
  • Chan, Kam C.

Abstract

We study the effect of bank shareholding on corporate cash management in China. We document that for state-owned enterprises (SOEs) with some of their shares owned by banks, the market value of cash holdings is less, and the overinvestment of free cash flow is more than those SOEs without bank shareholding. For non-SOEs, we do not find such an adverse impact. We also find that the adverse impact of bank shareholding is confined to state-owned banks owning SOE shares and stronger for pyramidal structure than those of non-pyramidal structure SOEs. The Chinese environment offers lessons that can help other emerging markets to review their bank shareholding regulations.

Suggested Citation

  • Zhang, Huili & Chan, Kam C., 2018. "Bank shareholding and corporate cash management: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 44(C), pages 235-253.
    • Handle: RePEc:eee:ecofin:v:44:y:2018:i:c:p:235-253
    DOI: 10.1016/j.najef.2018.01.007
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    More about this item

    Keywords

    Bank shareholding; Cash management; China;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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