An study of liquidity shock, financial market participation on hollowing behavior of controlling shareholder

Abstract

Agency conflict between controlling shareholders and small and medium-sized shareholders has become a key issue of concern and research in academia. However, existing studies have less thought about external root causes leading to their hollowing out behavior, especially the lack of in-depth research on the role of liquidity shocks in the mechanism between hollowing out behavior and market participation. Based on market participation perspective, empirical evidence from listed companies from 2006 to 2022, this paper empirically finds liquidity shocks significantly inhibit efficiency of controlling shareholders' hollowing out behavior; at the same time, financial market participation strengthens this inhibitory effect.