The twin agency problems in corporate finance [Elektronische Ressource] : on the basis of Stulz's theory / vorgelegt von Juan Du

Juan Valera

Informations

• Publié par: brandenburgische_technische_universitat_cottbus
• Publié le: 01 janvier 2009
• Nombre de lectures: 30
• Langue: English

Extrait

The Twin Agency Problems in Corporate Finance
- On the basis of Stulz’s theory -




Von der Fakultät für Maschinenbau, Elektrotechnik und Wirtschaftsingenieurwesen
der Brandenburgischen Technischen Universität Cottbus zur Erlangung des
akademischen Grades eines Doktors der Wirtschaftswissenschaften
genehmigte Dissertation


vorgelegt von


Master of Science

Juan Du

Geboren am 28. März 1978 in Hunan, China






Vorsitzender: Prof. Dr. rer. pol. A. Pitsoulis

Gutachter: Prof. Dr. rer. pol. K. Serfling

Gutachterin: Prof. Dr. rer.pol.K. Schimmelpfeng


Tag der mündlichen Prüfung: 27. Mai 2009
Contents

List of Figures...................................................................................IV
List of Tables ..................................................................................... V
List of Appendixes.......................................................................... VII
List of Abbreviations ....................................................................VIII
List of Symbols .................................................................................IX
1 Introduction 1
1.1 The state of financial globalization ................................................................................... 1
1.2 Three puzzles in financial globalization............................................................................ 2
1.3 “Twin Agency Problems” proposed by Stulz to explain the puzzles ................................ 3
1.4 Objectives of the Study .....................................................................................................7
1.4.1 Developing the model of Stulz’s theory and looking for theoretical solutions.......... 7
1.4.2 Researching the Chinese financial market and looking for empirical solutions ........ 8
1.5 The structure of the study ..................................................................................................8
2 Expropriators’ Decision on Expropriating the Existing
Company........................................................................................... 10
2.1 Assumptions and description of the model ..................................................................... 10
2.2 Firm value and expropriation by corporate insiders and state rulers............................... 13
2.3 Expropriation by corporate insiders ................................................................................ 14
2.3.1 Optimal fraction of expropriation by corporate insiders.......................................... 14
2.3.2 Important factors determining the fraction expropriated by corporate insiders....... 17
2.3.2.1 Impact of ownership concentration on expropriation by corporate insiders.... 17
2.3.2.2 Impact of expropriation by state rulers on expropriation by corporate insiders
....................................................................................................................................... 21
2.3.2.3 Impact of investor protection on expropriation by corporate insiders ............. 22
2.3.2.4 Impact of future profitability and capital cost on expropriation by corporate
insiders.......................................................................................................................... 24
2.4 Expropriation by state rulers ........................................................................................... 27
2.4.1 Optimal fraction of expropriation by state rulers ..................................................... 27
2.4.2 Impact of investor protection on expropriation by state rulers ................................ 29
2.5 Important factors determining firm value........................................................................ 30
2.6 Impact of investor protection on expropriators’ benefit.................................................. 32
2.6.1 Impact of investor protection on corporate insiders’ benefit ................................... 32
2.6.2 Imrotection on state rulers’ benefit............................................... 35
2.7 Impact of future profitability and capital cost on corporate insiders’ benefit ................. 37
2.8 Summary ......................................................................................................................... 38
3 Expropriators’ and Outside Investors’ Decision on Establishing
New Company .................................................................................. 42
3.1 Corporate insiders’ decision............................................................................................ 42
3.1.1 Corporate insiders’ financing decision..................................................................... 42
3.1.2 Corp investment decision .................................................................. 44
I3.1.2.1 Impact of investor protection on corporate insiders’ investment decision ....... 44
3.1.2.2 Impact of future profitability and capital cost on corporate insiders’ investment
decision ......................................................................................................................... 49
3.2 Outside investors’ investment decision ........................................................................... 50
3.2.1 Impact of investor protection on outside investors’ investment decision ................ 50
3.2.2 Impact of future profitability and capital cost on outside investors’ decision ......... 52
3.3 State rulers’ decision ....................................................................................................... 53
3.4 Summary ......................................................................................................................... 54
4. Possible Solutions Proposed by the Model to the Twin Agency
Problems ........................................................................................... 58
4.1 What should be done to solve the Twin Agency Problems? ........................................... 58
4.2 What could be done towy Problems?............................................. 59
4.3 Strategies should be taken by the state ............................................................................ 60
4.4 Summary..... 65
5 Practical Investigations in China................................................. 67
5.1 General description of financial market in China............................................................ 67
5.1.1 Development of Chinese financial market ............................................................... 67
5.1.2 Comparison of Chinese stock markets to other main stock markets........................ 74
5.2 Situation of ownership concentration in China 82
5.2.1 Construction of data ................................................................................................. 82
5.2.2 Proportion of ownership concentrated companies in China..................................... 85
5.2.3 Average degree of ownership concentration in China ............................................. 94
5.2.4 Most ownership-concentrated companies in China.................................................. 99
5.2.5 Most ow-dispersed companies in China..................................................... 101
5.3 Is listing abroad a good way for Chinese companies to become more ownership-
dispersed? ............................................................................................................................ 103
5.3.1 Comparison of ownership concentration between Chinese corporations listed in
mainland and those listed abroad .................................................................................... 103
5.3.2 Influence of state holding companies on the ownership concentration of companies
listed abroad .................................................................................................................... 105
5.3.3 Effect of the listing-abroad-age on ownership concentration of companies listed
abroad.............................................................................................................................. 107
5.3.4 Influence of great capital scale on ownership concentration of comp
abroad..... 108
5.3.4.1 Difference of ownership concentration between top 50 and bottom 50
companies.................................................................................................................... 108
5.3.4.2 Comparison of ownership concentration between companies listed abroad and
inland with the same capital scale .............................................................................. 115
5.3.5 Conclusion.............................................................................................................. 118
5.4 Relationship between profitability and ownership concentration ................................. 118
5.4.1 Relationship between ROE and ownership concentration for companies in different
industries ......................................................................................................................... 118
5.4.2 Relationship between profitability and ownership concentration for state holding
companies and non-state holding companies .....................................