Stake In Chinese Refinancing Behavior

Along with the development of enterprises system, increasingly concentrated equity has become one of the greatest characteristic of modern enterprise. While the increasing of ownership concentration also bring a series of problems to modern enterprise, which known by most modern scholars as the second agency problem, the interests conflict between controlling shareholders and minority shareholders relative to the agency problem between shareholders and managers. In the listed companies of China, controlling shareholders can control the enterprise financial management and business strategy through their controlling shares; and to provide a convenient control over private gain for themselves from various means by making listed companies becoming their cash machine, controlling shareholders’behaviors have seriously invaded the interests of other small and medium shareholders. In order to effectively curb the perverse refinancing behavior of Chinese listed companies, the China securities regulatory commission has repeatedly adjust enterprise refinancing regulatory policy, but the effect seems not very good.Based on the high concentration equity characteristic of listed companies in China, this paper will give some theoretical analysis and carry on empirical research on the strange Chinese listed companies equity refinancing phenomenon from the perspective of private benefits of control. There are two emphasis of this paper, the first one is the measurement of private benefits control. Because the private benefits obtained by controlling shareholders are hidden and not visible, most scholars have been made on some financial indicators as its quantification. This paper uses the net value of the receivable accounts and payable accounts relating to the controlling shareholder from the notes to listed firms’financial statements, and the net value divided by the final total assets is the key indicator for the private benefits of control (PBC); the result shows that the degree of equity concentration (Shri), equity balance degree index (Shr2-s), asset-liability ratio index (DEBT), the corporate governance index (GOV), and nature of the property index (State) are negative correlation with private benefits of control; controlling rights and cash flowing rights separation degree index (Sep), company SIZE index (SIZE) and the value of the company (Tobin’s Q) are positive correlation to private benefits of control. The second point is to study the equity refinancing behavior of listed companies from the perspective of private benefits of control. By the theoretical analysis and empirical research of this paper, the researches made on the equity refinancing behavior of listed companies indicates that there is a inverted "U" shaped relationship between private benefits of control and equity refinancing; the shares of the second to fifth shareholders and corporate growth ability index (Growth) are significant positive correlation to the listed companies equity refinancing behavior; other explanatory variables are different in different groups. In the first group, the shares owned by the controlling shareholder is less than50%, that is relative holding, the company size index (SIZE) is significant positive to the enterprises refinancing behavior, but the asset-liability ratio index (DEBT) are negative to the behavior; while, in the second group, the shares owned by the controlling shareholder is more than50%, that is absolute holding, there are positive correlation between the asset-liability ratio index (DEBT) and listed companies equity refinancing behavior; but company size index (SIZE) is significant negative to that behavior; the regression coefficients of corporate governance index (GOV) and the nature of the controlling shareholder index (State) are negative and not significant.