Institutional Development and Controlling Shareholder's Expropriation: Evidence from China

This paper argues that the possibility of political extraction can influence the controlling shareholder's tunneling. We use the index of "relationship between government and market'', which is from the NERI, as the measure of institutional development, and the samples are the listed companies in China during 2003-2007. The paper shows that, when the possibility of political extraction is high, firms controlled by the large shareholder who has a less separation of control rights and ownership rights hold less cash than other firms, and more expropriation by the controlling shareholder.