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Agency Costs of Controlling Shareholders' Share Collateral with Taiwan Evidence

Author

Listed:
  • Anlin Chen

    (Department of Business Management, National Sun Yat-Sen University, Kaohsiung 804, Taiwan)

  • Lanfeng Kao

    (Department of Finance, National University of Kaohsiung, Kaohsiung 811, Taiwan)

  • Yi-Kai Chen

    (Department of Finance, National University of Kaohsiung, Kaohsiung 811, Taiwan)

Abstract

Controlling shareholders' share collateral is a new source of the deviation of cash flow rights and control rights leading to minority shareholder expropriation. However, controlling shareholders' share collateral is not forbidden and has not received particular restriction leading to its popularity in the capital markets. Neglecting the potential agency costs resulting from controlling shareholders' share collateral would hurt the interests of creditors and minority shareholders. We need legal regulation on controlling shareholders' share collateral to reinforce corporate governance mechanism to protect the interests of creditors and minority shareholders.

Suggested Citation

  • Anlin Chen & Lanfeng Kao & Yi-Kai Chen, 2007. "Agency Costs of Controlling Shareholders' Share Collateral with Taiwan Evidence," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 173-191.
    • Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:02:n:s021909150700101x
    DOI: 10.1142/S021909150700101X
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    Citations

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    Cited by:

    1. Liu, Wei & Tian, Gary Gang, 2022. "Controlling shareholder share pledging and the cost of equity capital: Evidence from China," The British Accounting Review, Elsevier, vol. 54(6).
    2. Zhu, Bing & Xia, Xiaoxue & Zheng, Xiaojia, 2021. "One way out of the share pledging quagmire: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 71(C).
    3. Xiao, Zhongyi & Chen, Haitao & Chen, Kang, 2023. "How does institutional investors' information acquisition inhibit share pledging? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 89(C).
    4. Wang, Qiong & Qiu, Muqing & Tan, Wenhao, 2020. "Does insiders share pledging stifle innovation? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 72(C).
    5. Ping-Chang Lee & Hsin-Hong Kang, 2017. "The Role of Management Ownership in Bank Governance: Evidence from Taiwan," Accounting and Finance Research, Sciedu Press, vol. 6(4), pages 1-74, Novebmer.
    6. Wu, Wei-Hwa, 2021. "Extendible stock loan," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    7. Liu-Ching Tsai & Chaur-Shiuh Young & Hui-Wen Hsu, 2011. "Entrenched controlling shareholders and the performance consequences of corporate diversification in Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 37(1), pages 105-126, July.
    8. Hui-Wen Tang & Chong-Chuo Chang, 2015. "Does corporate governance affect the relationship between earnings management and firm performance? An endogenous switching regression model," Review of Quantitative Finance and Accounting, Springer, vol. 45(1), pages 33-58, July.
    9. Zijian Cheng & Zhangxin (Frank) Liu & Yupu Sun, 2021. "Share pledging and financial constraints in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4147-4189, September.
    10. Teresa Chu & In-Mu Haw & Bryan Lee & Woody Wu, 2014. "Cost of equity capital, control divergence, and institutions: the international evidence," Review of Quantitative Finance and Accounting, Springer, vol. 43(3), pages 483-527, October.

    More about this item

    Keywords

    Agency costs; controlling shareholder; moral hazard; share collateral;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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