Essays on Common Institutional Ownership, Multiple Large Shareholders and Zero Leverage

REN, ZE (2024) Essays on Common Institutional Ownership, Multiple Large Shareholders and Zero Leverage. PhD thesis, University of Nottingham.

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This thesis comprises a collection of three chapters that delve into significant aspects of corporate finance, exploring the impact of ownership structure, firms' financial decisions, and information asymmetry.

The first chapter investigates the relationship between common institutional ownership (CIO) and earnings management in Chinese listed firms during the period 2003 to 2020. The study finds compelling evidence that CIO effectively restrains firms' earnings management practices. The results indicate that CIO plays a direct role in reducing institutional investors' information costs of monitoring and, indirectly, fosters a better corporate governance environment, resulting in reduced earnings manipulation. Furthermore, the inhibitory effect of CIO on earnings management is found to be more pronounced in the presence of state-owned enterprises and firms with robust internal or external governance mechanisms, a larger control-ownership wedge, and adoption of Chinese accounting standards convergence with IFRS. The research findings also shed light on how CIOs can exercise their governance role through both "voice" and "exit" channels, which contributes to restraining earnings management.

The second chapter examines the influence of multiple large shareholders (MLS) on companies' debt preferences, using a dataset of Chinese publicly listed companies spanning from 2000 to 2020. The findings reveal that MLS lead to a decreased reliance on bank debt, effectively substituting the need for debt monitored by banks. Particularly noteworthy is the significant impact of MLS on companies with weak bank monitoring. However, the reduction in bank debt ratios is found to be less apparent for firms facing financial distress or exhibiting low information asymmetry. This essay contributes to a deeper understanding of corporate financing decisions, especially in the context of emerging markets.

The third chapter delves into the intriguing phenomenon of zero leverage policies in U.S. listed companies from 1983 to 2019. The empirical evidence demonstrates that firms experiencing lower information asymmetry and minimal transaction costs are more inclined to adopt a zero-leverage policy. Additionally, the association between information asymmetry, transaction costs, and zero leverage is found to be more pronounced for companies with lower costs of equity. These findings underscore the significance of information asymmetry and transaction costs in influencing capital structure choices, particularly after Regulation FD and for firms facing financial constraints.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Mateut, Simona
Keywords: corporate finance, ownership structure, firms' financial decisions, information asymmetry, common institutional ownership (CIO)
Subjects: H Social sciences > HG Finance
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
Item ID: 77159
Depositing User: REN, ZE
Date Deposited: 08 Apr 2024 14:26
Last Modified: 08 Apr 2024 14:26

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