Separation Of Control And Ownership,social Network And Cost Of Equity Capital

Since La Porta et al.(1999)studied the ownership structure of 27 developed countries,more and more scholars have realized that the ownership structure in most regions of the world is not dispersed,but highly concentrated in the hands of a few people.Therefore,the focus of corporate governance shifts from the first kind of agency problems to the second kind of agency problems.At present,there is still a general pyramid-type shareholder structure in China,and the imperfect capital market and related formal systems make small and medium-sized investors constantly suffer "tunnelling".How to solve the agent problem and information asymmetry caused by the separation of control and ownership is of great practical significance to our capital market.From the perspective of separation of control and ownership,this paper studies its impact on the cost of corporate equity capital.The topic of cost of equity capital has a long but enduring history.With the steady progress of the reform of China’s stock issue registration system,the 19 th CPC National Congress report,the 2019 Government Work Report and the 20 th CPC National Congress have all given instructions on how to solve the problem of enterprise financing.It can be seen that how to reduce the cost of equity capital has become the common appeal of Chinese enterprises.In addition,influenced by Confucianism,China has always been a relational society.Relying on social capital enables enterprises to get more attention from resources,information and investors embedded in the network.Meanwhile,the cost of social network construction by social network members encourages them to cherish their reputation in the network more and reduce self-interested behaviors.Thus,play a better role in corporate governance.Social network as informal system,can it make up for the formal system or improve the efficiency of our capital market? Therefore,this paper attempts to explore the relationship between the separation of control and ownership,social network and the cost of equity capital.This paper selects the data of Chinese A-share listed companies from 2007 to 2018 as the original sample,uses PEG model and GLS model as the measurement model of the cost of equity capital,and manually collects and collates the social network data of senior executives to empirically test the impact of the separation of control and ownership and social network on the cost of equity capital.And the influence of the separation of control and ownership and the interaction term of social network on the cost of equity capital.The research results of this paper show that:(1)The higher the separation degree of ultimate controlling shareholder’s control right and cash flow right,the higher the cost of equity capital.(2)The higher the degree of network centrality,the less the cost of equity capital.(3)A higher degree of network centrality can weaken the positive correlation between the separation of control and ownership and the cost of equity capital.After using instrumental variable method and Heckman two-stage method to correct the endogenous problems such as bidirectional causality and selection bias,the results are still robust.Furthermore,this paper also finds that the moderating effect of social networks is more significant in private enterprises and financially underdeveloped areas,which reflects the substitution effect of informal institutional social networks on formal institutions.This paper enriches the research results of separation of control and ownership and the cost of equity capital at home and abroad.At the same time,it makes up for the deficiencies in the socialization of traditional enterprise research and provides some reference for our informal system to play a role in corporate governance.