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Effects of the shareholder base on firm behavior and firm value in China

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  • Yung, Kenneth
  • Jian, Yi

Abstract

Contrary to the evidence based on US firms, we find that a large shareholder base does not benefit firms in China. Our results suggest that a large shareholder base in China implies elevated agency conflicts between individual investors and the controlling shareholders. We find that a larger shareholder base is associated with lower levels of capital expenditures, a lower standard deviation of return on assets, a lower standard deviation of return on equity, and no reduction in dividend payout. Our results imply that insiders increase the expropriation of outsiders as agency conflicts escalate. The shareholder base is associated with a decrease in firm value in China.

Suggested Citation

  • Yung, Kenneth & Jian, Yi, 2017. "Effects of the shareholder base on firm behavior and firm value in China," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 370-385.
    • Handle: RePEc:eee:reveco:v:49:y:2017:i:c:p:370-385
    DOI: 10.1016/j.iref.2017.03.001
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    1. Chia, Yee-Ee & Lim, Kian-Ping & Goh, Kim-Leng, 2020. "More shareholders, higher liquidity? Evidence from an emerging stock market," Emerging Markets Review, Elsevier, vol. 44(C).
    2. Chia, Yee-Ee & Lim, Kian-Ping & Goh, Kim-Leng, 2020. "Liquidity and firm value in an emerging market: Nonlinearity, political connections and corporate ownership," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Shareholder base; Investor recognition; China; State-owned enterprises; Agency problems;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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