Effects of Controlling Shareholders Agency on Debt Financing Agency Costs: Analysis based on Real Options

2007 ◽  
Vol 27 (9) ◽  
pp. 61-68 ◽  
Author(s):  
Xing LIU ◽  
Xiao-bao SONG
Keyword(s):  
Real Options ◽  
Agency Costs ◽  
Debt Financing ◽  
Controlling Shareholders ◽  
Costs Analysis

scholarly journals The Effects Of Ultimate Controlling Shareholders On Debt Maturity Structure

2013 ◽  
Vol 29 (2) ◽  
pp. 553 ◽  
Author(s):  
Kun Su ◽  
Peng Li
Keyword(s):  
Cash Flow ◽  
Agency Costs ◽  
Debt Maturity ◽  
Debt Financing ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Cash Flow Rights ◽  
Agency Costs Of Debt

Using a balanced panel data of 915 Chinese listed firms, this paper studies the effect of ultimate controlling shareholders on debt maturity structure by adopting random effect model. Our results show: the larger the ultimate controlling shareholders cash flow rights, the higher the cost of expropriating outside investors by ultimate controlling shareholder, and can reduce the agency costs of debt financing, so banks are willing to provide more long term debt funds for the firms. Ultimate controlling shareholders cash flow rights are positively related to debt maturity structure. The larger the divergence between ultimate controlling shareholders control rights and cash flow rights, the more likely of ultimate controlling shareholder to expropriate outside investors, and this increase the agency conflicts between firms and creditor, which leading to higher agency costs of debt financing, so banks tend to provide more short term funds for firms to constrain the ultimate controlling shareholder. The divergence between ultimate controlling shareholders controlling rights and cash flow rights are negatively related to debt maturity structure.

How Internal Control Protects Shareholders' Welfare: Evidence from Tax Avoidance in China

2020 ◽  
Vol 19 (2) ◽  
pp. 19-39
Author(s):  
Hsihui Chang ◽  
Xin Dai ◽  
Yurun He ◽  
Maolin Wang
Keyword(s):  
Control Systems ◽  
Internal Control ◽  
Agency Costs ◽  
Tax Avoidance ◽  
Positive Association ◽  
Data Availability ◽  
Corporate Tax ◽  
Controlling Shareholders ◽  
The Public ◽  
Prior Literature

ABSTRACT This paper investigates how effective internal control protects shareholders' welfare in the context of corporate tax avoidance. Prior literature documents a positive association between internal control weakness and low tax avoidance. In this paper, we re-examine this association and complement prior research by finding that the direction of the association between internal control and tax avoidance depends on the level of tax avoidance. Specifically, for firms with low (high) levels of tax avoidance, internal control quality is positively (negatively) associated with tax avoidance. In additional analyses, we further explore how internal control mitigates agency costs for state-owned enterprises and tunneling activities. We show that for state-owned enterprises, which have lower incentives to avoid tax, effective internal control prevents managers from paying more taxes to cater to the controlling shareholders' interests. We also find that the association between tax avoidance and tunneling is reduced by effective internal control systems. Data Availability: Data are available from the public sources cited in the text.

scholarly journals Agency Costs, Corporate Governance and the Nature of Controlling Shareholders: Evidence From French Listed Firms

2018 ◽  
Vol 8 (3) ◽  
pp. 256 ◽  
Author(s):  
Dabboussi Moez
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Agency Costs ◽  
Managerial Ownership ◽  
Investment Horizon ◽  
Agency Conflicts ◽  
Controlling Shareholders ◽  
Listed Firms ◽  
Indirect Benefits ◽  
The Impact

This paper examines the impact of internal corporate governance on agency costs for French firms from 2000 to 2015. Our results reveal that shareholders themselves are not a homogenous group since they have no single common investment horizon. We found that managerial ownership is more effective in mitigating operational expenses. However, they take advantage of excessive spending on indirect benefits. We show that board of directors does not serve as a significant deterrent to excessive discretionary expenses. Finally, we found that dividend policy is a useful tool to reduce agency conflicts by reducing cash that is available for discretionary uses.

scholarly journals The Asian crisis and corporate governance - ownership structure, debt financing, and corporate diversification

2006 ◽  
Vol 3 (3) ◽  
pp. 60-78 ◽  
Author(s):  
Masaharu Hanazaki ◽  
Qun Liu
Keyword(s):  
Governance Structure ◽  
Fund Raising ◽  
Debt Financing ◽  
Asian Crisis ◽  
Corporate Diversification ◽  
Firm Level ◽  
Family Control ◽  
Controlling Shareholders ◽  
Crony Capitalism ◽  
Level Analysis

Based on firm-level analysis, this paper suggests that ownership concentration enabling controlling shareholders to expropriate other shareholders; fund raising through debt that is short of effective monitoring by creditors; and inefficiency caused by the ill effects of diversification are all associated with significantly worse performance during the Asian crisis. The region’s predominant governance structure, characterized by family control and conglomerates, was considered a factor in its miraculous economic development but has been seen since the crisis as the of crony capitalism

Control Shifts via Share Acquisition Contracts with Shareholders (Takeovers)

2015 ◽  
Author(s):  
Paul Davies
Keyword(s):  
United States ◽  
Agency Costs ◽  
The United States ◽  
Controlling Shareholders ◽  
Regulatory Issues ◽  
Coordination Costs ◽  
Target Management ◽  
A Company ◽  
Made In

This chapter examines the regulatory issues that arise when there is an offer to acquire shares directly from one or more shareholders of a company such that control of that company shifts to the acquirer. It begins with a comparison between control shifts implemented by contract and corporate transactions which produce the same result. It identifies three principal areas where contract may need to be supplemented by takeover-specific rules arising out of the coordination costs of target shareholders, powers of target management, and agency costs of non-controlling shareholders. It then considers how takeover regulation could be fashioned so as to promote efficient and discourage inefficient transfers of control. The chapter concludes by focusing on the choices actually made in four countries: Japan, Germany, UK, and the United States.

Comparison of debt financing between international and domestic firms

2005 ◽  
Vol 1 (1) ◽  
pp. 49-68 ◽  
Author(s):  
Halit Gonenc
Keyword(s):  
Financial Markets ◽  
Multivariate Regression Analysis ◽  
Debt Financing ◽  
Fixed Rate ◽  
Content Type ◽  
Controlling Shareholders ◽  
International Firms ◽  
Domestic Firms ◽  
Markets And Institutions ◽  
Basic Features

PurposeTo investigate relative differences in debt financing between international and domestic industrial firms operating in Turkey, Germany and the UK.Design/methodology/approachAnalysis depends on multivariate regression analysis, while controlling the effects of firm‐specific characteristics, industry effects and controlling shareholders. The approach is to examine the effects of the features of the financial markets and institutions in the sample countries.FindingsTurkish international firms use higher total debts than domestic firms. However, no strong evidence is found for the sample of German and UK firms to support this result. The major finding is that, apart from the effects of firm‐specific factors, industry and controlling shareholders, Turkish international firms increase their debt financing at a fixed rate.Research limitations/implicationsThe basic features of Turkish financial markets and institutions, especially bank ownership of equity in firms, are the major reason for the differences between the results in the sample countries.Originality/valueThis paper provides an international comparison for the dissimilarity in debt financing between international and domestic firms.

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