The Effect Of Managerial Stock Ownership In China On Corporate Capital Structure

Many years ago, researchers in western countries had already studied on managerial ownership. They have already formed lots of mature theories about it. In rencent years, with the development of the capital market, the phenomenon of managerial ownership becomes more common in the listing corporation in China. Managerial ownership could have an positive impact on improving the value of companies and promoting the development of the companies. In fact, capital structure is the basis of company’s operation. A lot of theoretical and empirical studies show that there exists an optimal capital structure to realize maximization of the value of companies. So, what are the effects of managerial ownership on capital structure? Whether is the result same as other countries ’ ? It’ s not sure whether the levels of corporate governance would have influences on t he effects. So we want to find out the answer, and offer some advice.This paper analyzes the influence of managerial ownership on capital structure, which is basic on the theory of managerial ownership and the theory of optimal capital structure decision. We also research the difference of the effects caused by the level of corporate governance. As a result, we think, the managerial ownership will lead two different kinds of effects which is the convergence of interest effect and entrenchment effect. So each of them will have different effects on capital structure. But the corporate governance have a significant influence on the effects of managerial ownership. In the empirical analysis,the paper studies the effect of managerial ownership on corporate debt leverage using the data from quoted Chinese companies.We conduct regression analysis including corporate governance as a cross variable. The result shows that the there is a negative relationship between managerial ownership and debt leverage. Further more, we found that, in China, entrenchment effect of Chinese managerial ownership is more outstanding. And the result is a little bit different from other countries’. However, the high level of corporate governance in those companies release the entrenchment effect, because high level of corporate governance helps companies to supervise and restraint their managers. At last, according to that results, we consider that in order to enhance the incentive effect of managerial ownership and reduce the disadvant age of it, it has lots of thing that we can improve. Firstly, we should improve system of the managerial incentive. Secondly, it’ s necessary to strengthen the role of the board of directors and shareholders. Thirdly, we should improve the environment of the capital market, and diversify the ways of financing.