Asiasn review of Financial research

Past Issues

HOMEPast Issues Past Issues

Asian Review of Financial Research Vol.19 No.2 pp.189-224
Large Shareholder Ownership and Opportunistic Behavior of Firm's Financing
Jinho Jeong Kyungnam University
Jungeun Kwon Kyungnam University
Key Words : 기회주의 가설,자본조달,유상증자,사채발행,대리인 문제


The purpose of this study is to analyse the effect of the ownership structure on the opportunistic behavior of a firm's financing from the perspective of the agency theory. In this study, we investigate 365 security issuing cases from a sample of non-financial firms listed on the Korean Stock Exchange between 2001 and 2003. The main findings from this study are as follows. Firstly, we find that opportunistic financing only exists for equity issuing firms. For debt issuing firms, there is no evidence of opportunistic behaviour. The results imply that fixed commitments of debt financing reduces the motivation to sell overvalued debt to outside investors. Secondly, we find that increase in large shareholder ownership for equity issuing firms resulted in the decrease of opportunistic behavior, thus supporting the agency theory. Finally, we find that the information asymmetry in the equity issuing market induces a firm's manager to sell overvalued equity to outside investors. Our findings suggest that more efforts are needed to guarantee the transparency in the capital raising market to protect innocent outside investors.
Export citation