Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Product market competition and controlling shareholders' tunneling: Evidence from China

Product market competition and controlling shareholders' tunneling: Evidence from China This paper provides evidence supporting the disciplinary role of product market competition in controlling shareholders' tunneling. We use the regulation‐induced IPO suspensions in China as shocks to product market competition. With a generalized DID design, we find that reduced product market competition threat, induced by rivals' IPO suspension, increases incumbents' inter‐corporate loans by 0.4 percentage points (pp) and the probability of committing a capital occupation violation by 3.1 pp. The effect of IPO suspension on tunneling is weakened when the product market is highly competitive and more pronounced for companies with problematic agency problems and loose governance mechanisms. Furthermore, we document a reverse effect when IPO suspensions end. This study contributes to the literature on product market competition's disciplinary role by presenting evidence supporting a plausibly causal effect of competition and controlling shareholders' tunneling. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial and Decision Economics Wiley

Product market competition and controlling shareholders' tunneling: Evidence from China

Loading next page...
 
/lp/wiley/product-market-competition-and-controlling-shareholders-tunneling-DcvFfG0ieI

References (40)

Publisher
Wiley
Copyright
© 2022 John Wiley & Sons, Ltd.
ISSN
0143-6570
eISSN
1099-1468
DOI
10.1002/mde.3631
Publisher site
See Article on Publisher Site

Abstract

This paper provides evidence supporting the disciplinary role of product market competition in controlling shareholders' tunneling. We use the regulation‐induced IPO suspensions in China as shocks to product market competition. With a generalized DID design, we find that reduced product market competition threat, induced by rivals' IPO suspension, increases incumbents' inter‐corporate loans by 0.4 percentage points (pp) and the probability of committing a capital occupation violation by 3.1 pp. The effect of IPO suspension on tunneling is weakened when the product market is highly competitive and more pronounced for companies with problematic agency problems and loose governance mechanisms. Furthermore, we document a reverse effect when IPO suspensions end. This study contributes to the literature on product market competition's disciplinary role by presenting evidence supporting a plausibly causal effect of competition and controlling shareholders' tunneling.

Journal

Managerial and Decision EconomicsWiley

Published: Dec 1, 2022

There are no references for this article.