The State-Owned Capital Gains Handover System and managerial agency cost: Evidence from central state-owned listed companies in China

Huiting Lin, Yurun He, Maolin Wang and Yehua Huang

Finance Research Letters, 2020, vol. 36, issue C

Abstract: We examine the effect of the State-owned Capital Gains Handover System on managerial agency cost among 382 Chinese central state-owned listed companies during 2004 to 2017. The results show that the State-owned Capital Gains Handover System has significantly positive effect on reducing managerial agency cost. That means a higher gain-handover proportion contributes to more effective corporate governance. However, the positive effect would become weaker with a company's stronger profitability. In addition, we examine the internal transferring mechanism of gain-handover pressure inside company groups. We find that the positive effect become stronger if the parent company's cash flow right is weaker. This research enriches the study on the gain-sharing relationships with a unique Chinese circumstance, the State-owned Capital Gains Handover System, and is of great importance for further improvement of this system and SOE reform.

Keywords: The State-owned Capital Gains Handover System; Free cash flow; Managerial agency cost (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319304283

DOI: 10.1016/j.frl.2019.101325

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