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

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  • Lin, Tsui-Jung
  • Tsai, Han-Fang
  • Imamah, Nur
  • Hung, Jung-Hua

Abstract

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.

Suggested Citation

  • Lin, Tsui-Jung & Tsai, Han-Fang & Imamah, Nur & Hung, Jung-Hua, 2016. "Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 40(PA), pages 173-190.
    • Handle: RePEc:eee:pacfin:v:40:y:2016:i:pa:p:173-190
    DOI: 10.1016/j.pacfin.2016.10.007
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    Cited by:

    1. Fang, Yuanli & Hu, Maggie & Yang, Qingsen, 2018. "Do executives benefit from shareholder disputes? Evidence from multiple large shareholders in Chinese listed firms," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 275-315.
    2. Sen Lin & Fengqin Chen & Lihong Wang, 2020. "Identity of multiple large shareholders and corporate governance: are state-owned entities efficient MLS?," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1305-1340, November.
    3. Chen, Fengqin & Huyghebaert, Nancy & Lin, Sen & Wang, Lihong, 2019. "Do multiple large shareholders reduce agency problems in state-controlled listed firms? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    4. Zhong, Ruohan & Li, Yanxi & Wang, Yun, 2021. "Multiple large shareholders, control contests, and forced CEO turnover," Emerging Markets Review, Elsevier, vol. 48(C).
    5. Tan, Xue & Yu, Lin & Fung, Hung-Gay, 2022. "Firms with short-termism: Evidence from expatriate controlling shareholders," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    6. Bian, Wenlong & Ren, Yan & Zhang, Hao, 2022. "Do multiple large shareholders matter in financial firms? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    7. Sen Lin & Fengqin Chen & Lihong Wang, 0. "Identity of multiple large shareholders and corporate governance: are state-owned entities efficient MLS?," Review of Quantitative Finance and Accounting, Springer, vol. 0, pages 1-36.
    8. Long, Wenbin & Wu, Huiying & Li, Lidan & Ying, Sammy Xiaoyan & Li, Sihai, 2024. "Mixed-ownership structure, non-state-blockholder coalition, and tax avoidance," International Review of Financial Analysis, Elsevier, vol. 91(C).

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