Abstract
Executive Perquisites are agency cost and harm the interests of shareholders. After the split share reform, the first largest shareholder has decreasing his shares and the problem of executives’ expropriation has been more prominent. This paper uses the data of Chinese listed firms during 2006 to 2017 and investigates the corporate governance effect of bank loan on executive perquisites. The results show that bank loan can constraint the executive perquisites which have corporate governance effects; the corporate governance effect of bank loan has more prominent in Non-SOEs than in SOEs; and the corporate governance effect of bank loan has more prominent in the listed firm with higher proportion of share of the first largest shareholder. So the conclusions provide empirical evidence not only for the discussion of commercial bank reform but also for the corporate governance reform of Chinese listed firms under the financial systems of main bank financing.
Highlights
On May 9, 2005, China Securities Regulatory Commission launched the split share reform
The results show that bank loan can constraint the executive perquisites which have corporate governance effects; the corporate governance effect of bank loan has more prominent in Non-SOEs than in SOEs; and the corporate governance effect of bank loan has more prominent in the listed firm with higher proportion of share of the first largest shareholder
Different from the financial system based on direct financing such as Britain and the United States, Chinese financial system is based on indirect financing of banks
Summary
On May 9, 2005, China Securities Regulatory Commission launched the split share reform. This paper selects managers’ executive perquisites as the research object, discusses the first type of principal-agent problem between traditional shareholders and managers, and examines the corporate governance effects of bank loan on such principal-agent problems. The authors found that these research papers were mainly used during the data sample period, 1999-2004, 1995-2009, 2007-2008, and 2003-2014 This may not take into account the achievements of the market-oriented reform of China’s commercial banks. This paper empirically tests the influence of bank loan on executive perquisites, which is a supplement to the literature research on executive perquisites It expands the related literature research on the agency cost of listed companies in China under the background of post-share split reform. The change of shareholding of controlling shareholders highlights the problem of principal-agent relationship between shareholders and managers, examines the difference in the proportion of shareholdings of controlling shareholders and the impact of bank loan on managers’ on executive perquisites
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