Largest Shareholder, Nature Of Property Right And Debt Financing

As the cornerstone of corporate governance, ownership structure plays an important role in the company’s financial policy choices. As China’s special institutional background, the shareholding ratio of largest shareholder is relative concentrated, the equity nature of largest shareholder is mostly state-owned, which makes the behavior of major shareholders is unique in our country. As an important source of funding, debt financing’s borrowing costs and term structure are affected by the agency cost of listed companies, which are affected by the quality of corporate governance. Thus, we need to study the correlation between large shareholders and cost of debt and debt maturity structure, and to explore the role of corporate governance of the first big shareholder, to regulate the behavior of the largest shareholder, which would make it better for the improvement of corporate governance quality, and then promote the specifications of the debt financing of listed companies in our country and promote the efficiency of financing.In this paper, we choose China’s non-financial listed companies from 2007 to 2014 as research samples, by using ordinary least squares method, we empirically study the influence of the proportion of the largest shareholder, the nature of property rights and "dominance" on the cost of debt capital and debt maturity structure. This paper mainly studies the following questions:(1) As the largest shareholder stake increase, whether it has a significant impact on cost of debt capital and debt maturity structure;(2) whether there is a correlation between the nature of property rights and cost of debt capital or debt maturity structure of listed companies;(3) Under different nature of property right, the correlation between the ratio of the largest shareholder and the cost of debt capital and debt maturity structure;(4) When the proportion of the largest shareholder is higher than 50%, the correlation between the cost of debt capital and debt maturity structure whether change.The main conclusions of this article:(1) With the increase of the first big shareholder’s stake, large shareholders tend to be more consistent with the interests of the company, and able to effectively supervise management’s behavior, thus easing the proxy conflict between management and creditors as well as shareholders and creditors, finally, the cost of debt capital declines, and gain more long-term debt;(2) When the property rights of listed companies is state-owned, the company usually can get more preferential bank loans and more long-term debt;(3)Due to congenital government intervention of state-owned enterprises, there is a negative correlation between the ratio of the largest shareholder and the cost of debt capital, a positive correlation between the ratio of the largest shareholder and debt maturity structure, which mainly exists in non-state-owned listed companies;(4) When the proportion of the largest shareholder is higher than 50%, the correlation between the proportion of the largest shareholder and the cost of debt capital is no longer significant, but the positive correlation between the ratio of the largest shareholder and debt maturity structure is not effected by "dominance".