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Bank shareholding and corporate cash management: Evidence from China

Huili Zhang and Kam C. Chan

The North American Journal of Economics and Finance, 2018, vol. 44, issue C, 235-253

Abstract: We study the effect of bank shareholding on corporate cash management in China. We document that for state-owned enterprises (SOEs) with some of their shares owned by banks, the market value of cash holdings is less, and the overinvestment of free cash flow is more than those SOEs without bank shareholding. For non-SOEs, we do not find such an adverse impact. We also find that the adverse impact of bank shareholding is confined to state-owned banks owning SOE shares and stronger for pyramidal structure than those of non-pyramidal structure SOEs. The Chinese environment offers lessons that can help other emerging markets to review their bank shareholding regulations.

Keywords: Bank shareholding; Cash management; China (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.najef.2018.01.007

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