Ultimate Ownership Structure, Government intervention, and the Maturity
Structure of Corporate Debt: Evidence from Chinese List Companies
Abstract
We examine the effects of ultimate ownership structure and government intervention
on the maturity structure of corporate debt using a sample of Chinese listed
companies during 2004-2008. We find that (1) the cash flow rights of the ultimate
shareholder is positively associated with debt maturity; (2) the control rights of the
ultimate shareholder is negatively associated with debt maturity; (3) state ultimate
shareholders are positively associated with debt maturity relative to non-state ultimate
shareholders; (4) the degree of separation of control rights and cash flow rights (or the
control-ownership wedge) for the ultimate shareholder is negatively associated with
debt maturity; (5) government intervention is positively associated with debt maturity;
and (6) government intervention mitigates the negative relation between debt maturity
and the control-ownership wedge. Our findings are consistent with the view that the
wedge between control rights and ownership rights facilitates expropriation of outside
investors by the ultimate controlling shareholder and that short-term debt is useful in
mitigating the agency conflict between the controlling shareholder and creditors.