On Foreign Shareholdings and Agency Costs: New Evidence from China. Issue 12 (26th September 2018)

• Record Type: Journal Article
• Authors: Hai, Jiang; Min, Huang; Barth, James R.
• Is Part Of: Emerging markets finance & trade. Volume 54:Issue 12(2018)
• Page Start: 2815
• Page End: 2833
• Publication Date: 2018-09-26
• Subjects: agency costs -- cost of equity -- firm performance -- foreign shareholdings; G12 -- G32 -- G34; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2017.1412949
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: This article examines the impact of foreign shareholdings on agency costs of Chinese firms from 2006 to 2012. The empirical results indicate that: (1) direct foreign shareholdings, in contrast to indirect foreign shareholdings, improve asset utilization, suggesting low agency costs; (2) qualified foreign institutional investors play a significant role in firms because they are less subject to political pressure, which is consistent with lower agency costs, but this effect could be eroded by government control; and (3) foreign shareholdings reduce the cost of equity and improve firm performance. The results contribute to the privatization of state-owned enterprises and the domestic/foreign ownership structure of firms.