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The impact of shareholding structure on firm investment: Evidence from Chinese listed companies

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  • Chen, Alex A.
  • Cao, Hong
  • Zhang, Dayong
  • Dickinson, David G.

Abstract

This paper examines the impact of shareholding concentration and the class of shareholders on firm investment. We apply the Euler equation approach to the empirical modeling of investment for a panel dataset of 786 Chinese listed companies during 1998–2004. We find that a significant positive sensitivity of investment to internal funds is associated with firms that have a low level of shareholding concentration, large proportion of state shares and low proportion of publicly-owned shares. We find that cash flow is insignificant for high levels of legal person or public shareholding. We interpret this in the context of the impact of both liquidity constraints and corporate governance issues.

Suggested Citation

  • Chen, Alex A. & Cao, Hong & Zhang, Dayong & Dickinson, David G., 2013. "The impact of shareholding structure on firm investment: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 85-100.
    • Handle: RePEc:eee:pacfin:v:25:y:2013:i:c:p:85-100
    DOI: 10.1016/j.pacfin.2013.08.002
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    Cited by:

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    3. Wang, Mingzhu & Sun, Xiaojie, 2019. "Identity of large owner, regulation and bank risk in developing countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 106-133.
    4. Baolei Qi & Liuchuang Li & Qing Zhou & Jinghui Sun, 2017. "Does internal control over financial reporting really alleviate agency conflicts?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(4), pages 1101-1125, December.
    5. Ilker Yilmaz, 2022. "Leverage and Investment Cash Flow Sensitivity: Evidence from Muscat Securities Market in Oman," SAGE Open, , vol. 12(3), pages 21582440221, August.
    6. Adriana S. Cordis & Chris Kirby, 2017. "Capital expenditures and firm performance: evidence from a cross†sectional analysis of stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(4), pages 1019-1042, December.
    7. Zhang, Dayong & Cao, Hong & Dickinson, David G. & Kutan, Ali M., 2016. "Free cash flows and overinvestment: Further evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 58(C), pages 116-124.
    8. Abdolhossein Talebi Najafabadi* & Zahra Farhadi & Narjes Kamali Kermani, 2018. "The Relationship Between Social Responsibility and Investment-Cash Flow ?Sensitivity ? and the Role of Agency Costs," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 4(11), pages 294-302, 11-2018.
    9. Jiang, Fuxiu & Cai, Wenjing & Wang, Xue & Zhu, Bing, 2018. "Multiple large shareholders and corporate investment: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 66-83.

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    More about this item

    Keywords

    Firm investment; Shareholding structure; Corporate governance; China economic reform;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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