dc.description.abstract | We investigate the impact of multiple large shareholders (MLSS) on firms’ investment-cash flow sensitivity. We categorize identity of MLSS as central-government, local government, and institutional investors, and then further divide this three kinds of identity into four ownership structures: 1. Central government as largest stockholder and institutional investor as second largest stockholder. 2. Local government is the largest stockholder and institutional investor as second largest stockholder. 3. Institutional investor is the largest stockholder, central government as the second one. 4. Institutional investor is the largest stockholder, local government as the second one. We investigate whether different identities have different impact on firm’s investment-cash flow sensitivity. Moreover, we take the split share structure reform into account. Our sample includes all companies listed on the Shenzhen and the Shanghai Stock Exchanges during 2003-2012 and use panel data regression models to analyze the impact of split share structure reform on firms’ investment behaviors. Our results indicate that the presence of MLSS results in a sharper U-shaped curve, implying entrenchment effect. Specifically, when firms are controlled by institutional investors, local government as second largest stockholder can make the U-shaped curve flatter, indicating a mitigation of underinvestment problem. However, the findings of other subsamples have insignificant influences on investment-cash flow sensitivity. Finally, after spilt share structure reform, when institutional investor is the controlling shareholder and state as the second largest stockholder can make U-shaped curve flatter. These findings imply either central or local government would cooperate with the institutional investor, that is the largest shareholder, to lower financial constraint or enhance investment efficiency. | en_US |