Separation of Ownership, Agency Costs and Funds Idle——Evidence from China’s Listed Firms from 2007-2015
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| Title | Separation of Ownership, Agency Costs and Funds Idle——Evidence from China’s Listed Firms from 2007-2015
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| Author | Wen Chunhui ,Li Silong ,Yang Jinqiang and Luo Ming |
| Organization | School of Finance, Shanghai University of Finance and Economics；Shanghai University of Finance and Economics |
| Email | wchui0207@163.com；418285129@qq.com；yang.jingqiang@mail.shufe.edu.cn；luoming@189.cn |
| Key Words | separation of ownership; ultimate control; virtual economic; agency costs; funds idle |
| Abstract | Based on the tripartite game between managers, the ultimate controlling shareholder and minority shareholders of listed companies, we construct investment decision-making model including managers decision, controlling shareholders decisions and both echoing decisions. We use the model to analyze the influence of two types of agency costs of the management private benefit and private benefit of control on enterprise funds idling. Under the background of economic pro-cycle and counter -cyclical , we discuss strengthen or weaken effect of the first class agency costs on fund idling by private benefit of control , and use the panel data of Chinese listed companies between 2007 and 2015 to make empirical analysis. The empirical results show that: ①Management private benefit is the main cause of listed companies idle funds, and the influence of control private benefit on idle funds of listed companies is not obvious; ② Separation of ownership can strengthen or weaken the effect of management private benefit on idle funds of listed companies: In economic pro-cycle, the proportion of idle funds have positive proportional relation with management agency costs, also positive with separation rate of ownership; In economic counter-cyclical, the proportion of idle funds have positive proportional relation with management agency costs, but negative with separation rate of ownership; ③ Private enterprises ，industrial enterprises and enterprises in the eastern and central china have a stronger motivation for the funds idle compared to others. Therefore, making clear the control relationship of listed companies, and strengthening the regulatory on speculation money acts of listed companies is necessary. In this paper, we study the mechanism of idle funds from microcosmic perspective and expand the horizon of the research on corporate finance. |
| Serial Number | WP1139 |
| Time | 2016-12-06 |
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