Corporate Ownership, Debt, and Expropriation: Evidence from China

Authors

Yunxia Bai, Tongji University
Bing Xuan Lin, University of Rhode Island
Yaping Wang, Peking University
Liansheng Wu, Peking University

Document Type

Article

Date of Original Version

3-1-2013

Abstract

We provide direct evidence on the dark side of leverage and offer new insights regarding the role of debt in corporate governance. Using a sample of Chinese state-owned enterprises that have experienced a transfer of controlling rights, we find a positive and significant relationship between expropriation and debt usage. Firms controlled by private block shareholders tend to have higher leverage due to excessive expropriation via debt. The evidence we document provides fresh insights into the impact of debt on the agency problem between the controlling shareholder and minority shareholders, and suggests the presence of expropriation through debt and its conditional effect on corporate ownership.

Publication Title, e.g., Journal

China Journal of Accounting Studies

Volume

1

Issue

1

Citation/Publisher Attribution

Bai, Yunxia, Bing Xuan Lin, Yaping Wang, and Liansheng Wu. "Corporate Ownership, Debt, and Expropriation: Evidence from China." China Journal of Accounting Studies 1, 1 (2013): 13-31. doi: 10.1080/21697221.2013.781771.