Multiple Major Shareholders,Internal Control Quality And Debt Financing Costs

Debt financing has always been an important means for companies to obtain external financing.For emerging markets such as China,where capital markets are underdeveloped,debt financing is the company's main source of external funding.Taking China's debt financing situation in the past three years as an example,the stock of social financing in China in 2015-2017 was 138.14 trillion yuan,155.99 trillion yuan and 174.64 trillion yuan respectively,of which the balance of RMB loans issued to the real economy was 92.75 trillion yuan,105.19 trillion yuan and 119.03 trillion yuan.In the past three years,the stock of China's social financing scale and the balance of RMB loans issued to the real economy have shown a steady upward trend.Since debt financing is an important part of corporate finance,how to finance debt at a lower cost has always been the focus of scholars and entrepreneurs.The impact of agency issues on corporate debt financing costs is a major area of research for scholars.Jensen and Meckling(1976)point out that managers and shareholders within companies have the incentive to sacrifice creditor interests through asset substitution behavior to obtain personal gain.Shleifer and Vishny(1997)pointed out that in companies with concentrated equity,corporate governance is more manifested in the second type of agency problem that the controlling shareholder erodes the interests of small and medium shareholders and creditors.In order to gain control of private interests,the controlling shareholder will realize profit transfer through capital occupation,related party transactions or other short-selling methods,infringing the interests of minority shareholders or creditors(Shleifer and Vishny,1997;Johnson et al.2000).As is known to all,companies in Asia such as China generally have strong one or more major shareholders.Although large shareholder holdings can avoid the first type of principal-agent problem,there will be conflicts between controlling shareholders and minority shareholders(the second type of principal-agent problem),and in areas where equity is concentrated,the contradiction arising from the second type of principal-agent problem is far greater than the contradiction arising from the first-type principal-agent problem,although the literature has found that equity concentration will have an impact on the company's debt financing costs,but Few scholars have delved into whether there is a difference between whether the equity is concentrated in the same major shareholder or multiple major shareholders affects the company's debt financing costs.Based on the above background,this paper is based on principal-agent theory,signal transmission theory,information asymmetry theory and equity balance theory.Based on the non-financial industry and non-ST company data listed on the Main Board from 2008 to 2017,the literature review method and The empirical research method empirically examines the impact of multiple major shareholders on the company's debt financing costs.At the same time,it takes into account the uneven development of China's internal control system and China's unique institutional environment,and joins the Dibo index interactive variables that measure the quality of the company's internal control.The sample companies are further analyzed according to the nature of property rights.On the basis of theoretical analysis and empirical test,the paper draws the following conclusions:(1)The supervisory effect of multiple major shareholders,that is,the higher the degree of the company's major shareholders,the lower the debt financing cost of the company.(2)The higher the internal control quality of the company,the lower the financing cost of the debt obtained.(3)Under the same conditions,the internal control quality will enhance the negative correlation between the company's major shareholders and the debt financing costs,that is,the internal control quality and the company's multiple major shareholders have complementary effects.(4)Compared with state-owned holding companies,the impact of multiple major shareholders of the company on corporate debt financing costs is more pronounced in private companies.(5)The influence of multiple major shareholders on the marginal effect of the company's debt financing costs is diminishing,that is,the impact of multiple major shareholders on the company's debt financing costs decreases with the growth of multiple major shareholders.The research results of this paper show that the ownership structure will have an impact on the company's debt financing costs,and the internal control quality has complementary effects with many major shareholders.On the one hand,these research conclusions provide a new perspective for the design of the shareholding structure of listed companies,and on the other hand provide a new perspective for the regulatory authorities to regulate the debt financing market.