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The State-Owned Capital Gains Handover System and managerial agency cost: Evidence from central state-owned listed companies in China

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Listed:
  • Lin, Huiting
  • He, Yurun
  • Wang, Maolin
  • Huang, Yehua

Abstract

We examine the effect of the State-owned Capital Gains Handover System on managerial agency cost among 382 Chinese central state-owned listed companies during 2004 to 2017. The results show that the State-owned Capital Gains Handover System has significantly positive effect on reducing managerial agency cost. That means a higher gain-handover proportion contributes to more effective corporate governance. However, the positive effect would become weaker with a company's stronger profitability. In addition, we examine the internal transferring mechanism of gain-handover pressure inside company groups. We find that the positive effect become stronger if the parent company's cash flow right is weaker. This research enriches the study on the gain-sharing relationships with a unique Chinese circumstance, the State-owned Capital Gains Handover System, and is of great importance for further improvement of this system and SOE reform.

Suggested Citation

  • Lin, Huiting & He, Yurun & Wang, Maolin & Huang, Yehua, 2020. "The State-Owned Capital Gains Handover System and managerial agency cost: Evidence from central state-owned listed companies in China," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319304283
    DOI: 10.1016/j.frl.2019.101325
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