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Non-controlling large shareholders and dynamic capital structure adjustment in China
Plos One
|July 31, 2024
Summary
Non-controlling large shareholders (NCLSs) enhance corporate capital structure adjustment speed and reduce deviations in Chinese A-share firms. Their impact is stronger when correcting upward deviations and more pronounced in non-state-owned enterprises.
Area of Science:
- Corporate Finance
- Capital Structure Theory
- Shareholder Governance
Background:
- Corporate capital structure adjustment is crucial for firm value.
- The influence of non-controlling large shareholders (NCLSs) on this adjustment remains under-explored.
- Understanding these dynamics is vital for Chinese listed firms.
Purpose of the Study:
- To investigate the impact of NCLSs on the speed and direction of corporate capital structure adjustment.
- To analyze the moderating effects of ownership type (SOEs vs. NSOEs) and deviation direction.
- To identify the underlying mechanisms driving NCLS influence.
Main Methods:
- Empirical analysis using a sample of Chinese A-share listed firms from 2010-2020.
- Regression analysis to assess the relationship between NCLSs and capital structure adjustment speed.
- Mechanism analysis to explore the roles of agency costs and financing constraints.
Main Results:
- NCLSs significantly increase dynamic capital structure adjustment speed and reduce deviation.
- NCLSs exhibit stronger influence on downward adjustment speed after upward deviations.
- NCLSs positively impact adjustment speed in both SOEs and NSOEs, with a more significant effect in NSOEs.
Conclusions:
- NCLSs play a key role in improving corporate capital structure dynamics.
- Reducing agency costs and financing constraints are primary channels for NCLS influence.
- Findings contribute to capital structure adjustment theory and offer insights for Chinese firms.
