IDEAS home Printed from https://ideas.repec.org/a/eme/jaeepp/jaee-09-2011-0037.html
   My bibliography  Save this article

Does ownership structure affect the degree of corporate financial distress in China?

Author

Listed:
  • Dan Hu
  • Haiyan Zheng

Abstract

Purpose - – The purpose of this paper is to investigate the degree of corporate financial distress (DOFD) and relationship between ownership structure and the DOFD in China. Design/methodology/approach - – The authors estimate the DOFD across a sample of 378 Chinese-listed companies that got into financial distress between 2000 and 2008. The DOFD reflects long-term solvency capability, short-term liquidity capability, development capability, risk level, profitability capability, operating capacity, and cash flow capability. The authors analyze the relationship between ownership structure and the DOFD in these companies, using the panel data analysis method. Findings - – The authors find that a concentrated ownership structure is negatively related to the DOFD. Further, the results indicate that a state-owned status helps firms in decreasing their DOFD and that the separation of cash-flow rights and control rights is positively related to the DOFD. The authors also found that the Chinese special treatment (ST) system needs further improvement. The reason is that ST firms can be classified into “value” ST firms and “garbage” ST firms. They have different DOFD and change trend, so they should not be treated equally. Originality/value - – This paper find that Chinese ST system and previous research are not helpful for risk-seeking investor to distinguish and evaluate “value” ST firms and “garbage” ST firms. It is unfair to warn and punish this two kinds of firms equally, so ST system should be improved. The authors also suggest that risk-seeking investor can choose ST firms that have a concentrated ownership structure and are controlled by the state or local government. These findings are not observed in previous studies.

Suggested Citation

  • Dan Hu & Haiyan Zheng, 2015. "Does ownership structure affect the degree of corporate financial distress in China?," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 5(1), pages 35-50, February.
    • Handle: RePEc:eme:jaeepp:jaee-09-2011-0037
    DOI: 10.1108/JAEE-09-2011-0037
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JAEE-09-2011-0037/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JAEE-09-2011-0037/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JAEE-09-2011-0037?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Umair Bin Yousaf & Khalil Jebran & Irfan Ullah, 2024. "Corporate governance and financial distress: A review of the theoretical and empirical literature," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1627-1679, April.
    2. Yuan George Shan & Indrit Troshani & Jimin Wang & Lu Zhang, 2023. "Managerial ownership and financial distress: evidence from the Chinese stock market," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 20(1), pages 192-221, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jaeepp:jaee-09-2011-0037. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.