The Controlling Shareholder's Personal Stock Loan and Firm Performance
Date Issued
2001-10
Date
2001-10
Author(s)
Chen, Yehning
DOI
2006092712273055450
Abstract
This paper studies companies that have a controlling shareholder. In particular, it
examines the relationship between firm performance and its controlling shareholder’s
personal loan. We present a model to identify two effects of a personal loan that is
secured by stocks. The loan can be beneficial ex ante, because it relaxes the wealth
constraint of controlling shareholders and allows firms to invest in good projects.
The loan can also be harmful ex post, because it will create an incentive for
controlling shareholders to pursue risky projects. We use a sample of listed
companies in Taiwan to test our hypotheses and find consistent evidence.
examines the relationship between firm performance and its controlling shareholder’s
personal loan. We present a model to identify two effects of a personal loan that is
secured by stocks. The loan can be beneficial ex ante, because it relaxes the wealth
constraint of controlling shareholders and allows firms to invest in good projects.
The loan can also be harmful ex post, because it will create an incentive for
controlling shareholders to pursue risky projects. We use a sample of listed
companies in Taiwan to test our hypotheses and find consistent evidence.
Publisher
臺北市:國立臺灣大學財務金融學系
Type
report
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Format
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