Abstract
Bank loans can convey information about the borrowing firms that have proper corporate governance systems. Using a sample of bank loan announcements in China, we find that the market reaction is positive after the split share structure reform in 2005, which aligns the interests of large shareholders and minority shareholders, government and public investors, and alleviates their tunneling incentives. We also find that this effect is more pronounced for private firms as the reform mainly enhances corporate governance for private firms. The signaling role of bank loans is less pronounced for firms with less severe information asymmetry after the reform, e.g. higher shareholdings of mutual funds and higher proportion of independent directors. Related party transactions decrease when they obtain bank loans after the reform, which reflects the alleviation of tunneling after the reform.
Original language | English |
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Article number | 100773 |
Pages (from-to) | 1-11 |
Number of pages | 11 |
Journal | Emerging Markets Review |
Volume | 48 |
Early online date | 5 Nov 2020 |
DOIs | |
Publication status | Published - Sept 2021 |
Bibliographical note
Funding Information:We acknowledge the financial support by the National Natural Science Foundation of China (No. 71603225 ). Zhang acknowledges the financial support by the Beijing Social Science Foundation (No. 17YJA005 ). Lu acknowledges the great research assistant work by Zhihan Zhou.
Publisher Copyright:
© 2020
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
Funding
We acknowledge the financial support by the National Natural Science Foundation of China (No. 71603225 ). Zhang acknowledges the financial support by the Beijing Social Science Foundation (No. 17YJA005 ). Lu acknowledges the great research assistant work by Zhihan Zhou.
Funders | Funder number |
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National Natural Science Foundation of China | 71603225 |
Beijing Social Science Fund | 17YJA005 |
Keywords
- Bank loan announcements
- Market reaction
- SOEs
- Tunneling