Lockup Expiration of Chinese Non-tradable Shares, Capital Investment and Private Benefits of Control: Evidence from the Split Share Structure Reform of China's Listed Companies

Abstract

Abstract:

Based on the theory of capital investment results in private benefits of control (PBC), and combined with our current emerging and transitional market background, this paper empirically studied effects on different capital investments to PBC by using data of Chinese listed companies which controlling rights diverted in A stock markets of Shanghai and Shenzhen from 2001 to 2013. The results of empirical study show that:1.the PBC after lockup expiration is higher than the before one; 2. the PBC is positively related with capital investment level. With lockup expiration of Chinese non-tradable shares, the positive relationship is getting weakened; 3 equity investments are positive relativity with the PBC as well. When the non-tradable shares are locked up, the private benefits of control is more sensitive with level of share rights investment; 4.controlling shareholders' capital investment decision motivated by self-interest can harm minority investors, And this behavior hasn't been essentially changed because of completion of China's shareholder structure reform. Finally,the conclusions of this paper give some policy implications to government and minority investors.

Key words: lockup expiration, capital investment, investment level, private benefits of control

Wu Dongmei, Zhuang Xintian. Lockup Expiration of Chinese Non-tradable Shares, Capital Investment and Private Benefits of Control: Evidence from the Split Share Structure Reform of China's Listed Companies[J]. , 2016, 28(10): 67-78.

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