ABSTRACT
We investigate how the characteristics of firms’ actual controllers influence firms’ access to external finance. Using hand-collected data of actual controllers of Chinese firms, we find that firms have significantly lower leverage when the actual controllers have foreign residency. Whereas actual controllers’ political connection increases firm leverage, such effect is fully eroded when the actual controllers have foreign residency.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 A news article (http://www.chinanews.com/stock/2014/06-14/6280541.shtml) reports that a number of actual controllers of public-listed firms have foreign residency and calls for tighter regulation. On 26 August 2015, the Chinese Securities Regulatory Commission issued a warning to Nanling Automobile Group for failing to report foreign residency of its actual controllers.
2 Political experience refers to service in the Party committee, the government, the People’s Congress, the People’s Political Consultative Conference, the People’s Court, or the People’s Procuratorate at both central or local levels.