Skip to main content
placeholder image

Family control and loan collateral: Evidence from China

Journal Article


Abstract


  • Using a sample of 612 listed Chinese non-SOEs from 2006 to 2009, we show that the use of collateral is

    higher in family-controlled firms. This effect is more pronounced when family firms have a larger controlownership

    wedge, family representation in management, and are led by a descendant chairman/CEO. We

    further document that having multiple large shareholders, paying higher dividends, having completed

    the split-share structure reform and being located in provinces with more competitive credit markets

    can mitigate the incentive of controlling families to engage in expropriation and reduce the level of collateral

    required. Overall, we contend that in China, the risk of expropriation associated with family control

    leads to an increased credit risk and, in turn, higher collateral being required by banks.

UOW Authors


Publication Date


  • 2016

Citation


  • Pan, X. & Tian, G. Gang. (2016). Family control and loan collateral: Evidence from China. Journal of Banking and Finance, 67 53-68.

Scopus Eid


  • 2-s2.0-84963752879

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/859

Has Global Citation Frequency


Number Of Pages


  • 15

Start Page


  • 53

End Page


  • 68

Volume


  • 67

Place Of Publication


  • Netherlands

Abstract


  • Using a sample of 612 listed Chinese non-SOEs from 2006 to 2009, we show that the use of collateral is

    higher in family-controlled firms. This effect is more pronounced when family firms have a larger controlownership

    wedge, family representation in management, and are led by a descendant chairman/CEO. We

    further document that having multiple large shareholders, paying higher dividends, having completed

    the split-share structure reform and being located in provinces with more competitive credit markets

    can mitigate the incentive of controlling families to engage in expropriation and reduce the level of collateral

    required. Overall, we contend that in China, the risk of expropriation associated with family control

    leads to an increased credit risk and, in turn, higher collateral being required by banks.

UOW Authors


Publication Date


  • 2016

Citation


  • Pan, X. & Tian, G. Gang. (2016). Family control and loan collateral: Evidence from China. Journal of Banking and Finance, 67 53-68.

Scopus Eid


  • 2-s2.0-84963752879

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/859

Has Global Citation Frequency


Number Of Pages


  • 15

Start Page


  • 53

End Page


  • 68

Volume


  • 67

Place Of Publication


  • Netherlands