NDLI: The impact of separation of ultimate control rights and cash flow rights on debt financing cost

Content Provider	IEEE Xplore Digital Library
Author	Dang Xing-hua Wang Yu-xiao Yang Min-li
Copyright Year	2012
Description	Author affiliation: College of Economy and Management, Xi'an University of Technology, China, 710053 (Dang Xing-hua; Wang Yu-xiao; Yang Min-li)
Abstract	To disclose the effects of separation of ultimate controlling rights and cash flow rights on debt financing cost, this paper examines empirically how ultimate controlling shareholder influences cost of debt, based on a balanced panel (4880 observations in total) composed of 976 non-financial companies listed in Shenzhen and Shanghai stock exchange during 2006 ∼ 2010 and applied random effect model and parametric tests to empirically investigate the impact of separation of ultimate controlling rights and cash flow rights on debt financing cost by controlling related variables. The results show that the separation of ultimate controlling right and cash flow right does affect cost of debt. Specifically speaking, (1) the ultimate controlling shareholders' cash flow rights is negatively related to cost of debt, indicating that the higher cash flow rights of ultimate controlling shareholders,the lower the cost that it expropriates the debtor,the listed company will use little cost of debt;(2) the degree of separation of ultimate controlling shareholders' control rights and cash flow rights has significantly negative correlation with cost of debt, indicating that the supplier of debt capital will charge for higher capital cost for higher separation of control rights and cash flow rights in order to mitigate agency conflicts, compared with those companies without separation of control right and cash flow right.
Starting Page	1308
Ending Page	1313
File Size	302384
Page Count	6
File Format	PDF
ISBN	9781467330152
ISSN	21551855
e-ISBN	9781467330145
DOI	10.1109/ICMSE.2012.6414344
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2012-09-20
Publisher Place	USA
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Industries Fluid flow measurement separation of control rights and cash flow rights Economic indicators ultimate controlling Companies Tin Educational institutions cash flow rights Stock markets cost of debt
Content Type	Text
Resource Type	Article

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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