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Does Expropriation of Large Shareholders Change Corporate Investment Behaviors? Evidence from Chinese Listed Companies

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  • Jinqing Zhang
  • Hui Chen
  • Yunbi An

Abstract

This paper presents a three-period dynamic model establishing the expropriation-investment relation for firms with financing constraints. Focusing on Chinese listed companies, we find that firms with less tight financing constraints overinvest before expropriation if the intended expropriation level is below a threshold, and underinvest if otherwise, while expropriation in these firms does not impact inefficient investment during and after expropriation even after relevant sanctions are imposed. We also find that expropriation in firms with tight financing constraints has no significant impacts on inefficient investment before expropriation, but further tightens firms’ financing constraints during and after expropriation, leading to underinvestment.

Suggested Citation

  • Jinqing Zhang & Hui Chen & Yunbi An, 2020. "Does Expropriation of Large Shareholders Change Corporate Investment Behaviors? Evidence from Chinese Listed Companies," Global Economic Review, Taylor & Francis Journals, vol. 49(3), pages 223-250, July.
    • Handle: RePEc:taf:glecrv:v:49:y:2020:i:3:p:223-250
    DOI: 10.1080/1226508X.2020.1792330
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    Cited by:

    1. Yuanyue Wang & Zhaohui Yu & Xiaojing Yi, 2022. "Financing liabilities and inefficient investment of listed companies: Based on the adjustment effect of different financial structures," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 848-875, December.

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