Title: Firm leverage and the private benefits of control in Chinese firms

Authors: Zhang Zhaoguo, He Weifeng, Chen Jing

Addresses: Management School, Huazhong University of Science and Technology, Wuhan, Hubei, 430074, China. ' Management School, Huazhong University of Science and Technology, Wuhan, Hubei, 430074, China. ' Management School, Huazhong University of Science and Technology, Wuhan, Hubei, 430074, China

Abstract: This study investigates the relationship between capital structure and the private benefits of control of listed Chinese firms. A sample of firms listed on the Chinese stock markets is used to estimate the private benefits of control. The private benefits of control are approximately 18% (on average) in China. There is a statistically significant negative relationship between Short-Term Debt (STD) and the private benefits of control. In addition, a positive relationship exists between Long-Term Debt (LTD) and the private benefits of control. Finally, a statistically significant negative relationship exists between total debt and the private benefits of control.

Keywords: capital structure; private benefits of control; minority stockholder protection; Chinese firms; China; short-term debt; total debt; control transactions; controlling interest; controlling shareholders; finance.

DOI: 10.1504/AAJFA.2008.016887

Afro-Asian Journal of Finance and Accounting, 2008 Vol.1 No.1, pp.6 - 16

Published online: 26 Jan 2008 *

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