Effects of the Propensity of the Largest Shareholder on Capital Structure of Listed Companies in China

摘要

Using a sample of 2278 leverage ratios of 1139 companies listed in Chinese A share market, this paper first examined the relationship between the degree of control of the largest shareholder on decision making and the capital structure of listed companies in China via empirical test. Then, based on the empirical result, the reason why this result formed was construed through analyzing the value propensity of the largest shareholder and its influence on the debt ratio. The empirical analysis indicates that the debt ratio of listed companies is negatively related to both the share proportion and the illiquid share proportion held by the largest shareholder, that is, the higher the share proportion and illiquid share proportion held by the largest shareholder, the lower the debt ratio is. From theoretic analysis, in such a stock market like that in China where stocks are issued with a premium and ownership is segmented, equity financing under the condition of the highly concentrated ownership possessed by the largest shareholder conduces to magnify the equity value of the largest shareholder without facing the threat of takeover from stock market and restriction from creditors. In this way, equity financing is preferred, and so the debt ratio is lowered.