Does Ownership Structure Matter? Evidence from the Excess Cash in China

Sun, Zhenzhen; Wang, Yaping

doi:10.2139/ssrn.1787360

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Does Ownership Structure Matter? Evidence from the Excess Cash in China

European Journal of Finance, 2012

37 Pages Posted: 16 Mar 2011 Last revised: 1 Mar 2015

See all articles by Zhenzhen Sun

Zhenzhen Sun

University of Massachusetts Dartmouth; University of Massachusetts Dartmouth

Yaping Wang

Peking University - Guanghua School of Management

Date Written: December 1, 2012

Abstract

We examine the effect of corporate ownership structure on the market value of excess cash in Chinese listed firms. We find that state ownership has a positive effect, as the market value of excess cash is greater in state-owned firms than in privately controlled firms. Furthermore, we show that expropriation by controlling shareholders is significantly higher in privately controlled firms than in state-owned firms and increases with excess cash. The evidence is consistent with the view that the market believes private controlling shareholders are more likely to extract private benefits associated with cash reserves.

Keywords: Cash holdings, ownership structure, controlling shareholders, expropriation

JEL Classification: G31, G34, G32

Suggested Citation: Suggested Citation

Sun, Zhenzhen and Wang, Yaping, Does Ownership Structure Matter? Evidence from the Excess Cash in China (December 1, 2012). European Journal of Finance, 2012, Available at SSRN: https://ssrn.com/abstract=1787360 or http://dx.doi.org/10.2139/ssrn.1787360