Financing Effect of the Protection of Shareholder’s Rights
|Keywords||Protection of shareholder’s rights Financing cost Controlling shareholders State-owned stock-controlling enterprises Corporate governance|
The financing decision of enterprises is one of the key questions of modern financial theories. This dissertation provides a theoretical explanation and empirical analysis for the financing cost effect of the protection of stockholder’s rights of listed companies. The dissertation includes several main parts: (1) Discussion about the connation of the protection of shareholder’s rights and its protection mechanism; (2) To provide a new method to calculate the scores of the protection of shareholder’s rights so that we can make a comparison of the protection of shareholder’s rights among different domestic listed companies facing the same judicatory system in China; (3) To make more accurate description of the current situation of the protection of shareholder’s rights of listed companies in China; (4) To design a theoretical model to describe the relationship between protection of shareholder’s rights and corporate financing cost; (5) Using the Approach Analysis and cross-section regression method to make an empirical analysis of the financing cost effect of the protection of stockholder’s rights of listed companies to see whether the hypotheses of the theoretical model are proved.Main conclusions of the study are as follows: (1) The connation of the protection mechanism of shareholder’s rights is beyond law protection, it includes the following parts: First is the outside judicatory environment including the perfection of judicatory system and its enforcement efficiency; Second is the informality institutional environment including culture, ideology, social criterions, etc; Third is the perfection and enforcement efficiency of outside governmental supervision. (2) The aggregate level of the protection of our listed companies’ shareholder’s rights is not high by using the new measurement of protection of shareholder’s rights, less than the ideal score of 5. Besides, according to area, the protection of shareholder’s rights in more developed eastern area is in general better than that of the middle and western area in China. (3) As the degree of the protection of shareholder’s rights of listed companies in China increases, the cost of equity financing statistically decreases. (4) Earnings smoothness has no significant effect on the cost of equity financing, but earnings index has significant effect on the cost of equity financing. This shows that the analyses made by our investors to listed companies are not deep enough, and their rationalities wait to be improved. (5)The protection of shareholder’s rights and earnings management do more effect on state-owned enterprises than non-state-owned enterprises, while investor’s of non-state-owned enterprises care more on Financial index such as leverage ratio, B/M and earning level than investor’s of state-owned enterprises. (6) Local government’s intervention has no significant effect on the financing cost of enterprises, but it has some positive effect on the improvement of the protection of shareholder’s rights. This shows that the intervention of local government increases, the protection of shareholder’s rights improves, but whether this improvement is gained by sacrifice the efficiency of economy needs to be further studied. (7) Local government’s intervention has more effect on the financing cost of state-owned enterprises than that of Non-state-owned enterprises.