Why The Split-Share Structure Reform Failed To Reduce Cash Holdings Of Listed State-owned Enterprises?

The Split-Share Structure Reform granted previously non-tradable shares legitimate trading rights on the exchanges,which could relieve the inconsistency between non-tradable and tradable shareholders and alleviate the agency problem of listed companies.However,related empirical studies have shown that the level of cash holdings which are closely linked to agency issues did not decline significantly in listed state-owned enterprises after the reform.This paper provides a possible explanation for the above-mentioned inconsistency between theoretical analysis and empirical evidence by noting the fact that the effects of the Split-Share Structure Reform and the Four-Trillion Stimulus Package overlapped on the listed state-owned enterprises during a same period,namely,the Stimulus Package which happened right after the Split-Share Structure Reform could offset the positive effect of the reform on the enterprises in some way.This paper uses A-share non-financial listed companies from 2001 to 2010 as research sample,chooses private state-owned enterprises as matching sample to control the impact of the Stimulus Package on the cash holdings of listed state-owned enterprises,and applied a series of empirical methods to test this explanation.The robust results found in this paper mainly include:(1)Before removing the impact of Stimulus Package,the average cash holding level of listed state-owned enterprises did not decrease after the Split-Share Structure Reform,which was consistent with the findings in previous studies.(2)After controlling the impact of Stimulus Package,the cash holding level of listed state-owned enterprises declined significantly after the reform,which confirmed the explanation raised in this paper.(3)Further analysis shows that the change in cash holdings of listed companies after the reform was explained by the alleviation of agency problem,rather than the change of the soft-budget constraints or the change of over-investment mentioned in the previous studies.