An Empirical Study On The Relationship Between Debt Financing,Internal Control Quality And Ultimate Shareholder Interest Encroachment

There is a common concentrated equity structure in listed companies in China.Generally speaking,there are ultimate controlling shareholders who typically engage in interest expropriation behavior towards listed companies.However,in listed companies,whether the ultimate shareholder actually engages in interest expropriation behavior and the degree of interest expropriation is related to the environment in which the company is located.Debt Financing and the quality of internal control are regarded as important factors that affect the behavior of ultimate shareholders’ interests.Therefore,it has a certain theoretical and practical significance to study the impact of debt financing and internal control quality of listed companies on their ultimate shareholders’ interests.In this study,based on 7602 internal control quality data of listed companies from 2007 to 2020 in China,the panel threshold model and the static panel regression model were used to carry out the empirical analysis that the impact of debt financing on the expropriation of the ultimate shareholders’ interests depends on the threshold effect and regulatory effect of the quality of internal control.The main research work and conclusions were as follows:(1)Taking the quality of internal control as a threshold variable,the panel threshold model was constructed,and the threshold effect of debt financing on the expropriation of ultimate shareholders’ interests was constructed.The results indicate that there is a threshold effect related to the quality of internal control on the impact of bank debt,commercial credit,short-term debt,and long-term debt on the ultimate shareholder behavior.Bank debt,commercial credit,and long-term debt have a positive impact on the ultimate shareholder interest expropriation behavior,and when the quality of internal control exceeds the corresponding threshold value,this positive impact will be weakened.Short-term debt has a negative impact on the ultimate shareholder’s expropriation behavior,and when the quality of internal control exceeds the corresponding threshold value,this negative impact will be strengthened.(2)Taking the quality of internal control as the moderating variable,the static panel regression model was used to explore the moderating effect of debt financing on the expropriation of ultimate shareholders’ interests.The results indicate that the quality of internal control has a significant negative moderating effect in studying the impact of bank debt,commercial credit,and long-term debt on the ultimate shareholder’s interest expropriation behavior.That is,the quality of internal control can suppress the impact of bank debt,commercial credit,and long-term debt on the ultimate shareholder’s interest expropriation behavior;The moderating effect of internal control quality on the impact of short-term debt on the ultimate shareholder’s interest expropriation behavior is not significant.(3)According to the nature of corporate property rights,the grouping was carried out to explore the moderating effect of debt financing on the expropriation of ultimate shareholders’ interests.The results indicate that in state-owned enterprises,the quality of internal control has a significant negative moderating effect in studying the impact of bank debt,commercial credit,and long-term debt on the ultimate shareholder interest expropriation behavior;In non-state-owned enterprises,the moderating effect of internal control quality on the impact of bank debt,commercial credit,and long-term debt on the ultimate shareholder’s interest expropriation behavior is not significant.Short-term debt has a significant positive moderating effect on ultimate shareholders’ expropriation,that is,higher internal control quality can enhance the reverse effect of short-term debt on ultimate shareholder benefit expropriation.(4)According to the size of the company,the grouping was carried out to explore the moderating effect of debt financing on the expropriation of ultimate shareholders’ interests.The results indicate that when the enterprise scale is large,the quality of internal control has a significant negative moderating effect in studying the impact of bank debt,commercial credit and long-term debt on the ultimate shareholder interest expropriation behavior,and it can weaken the bank debt,commercial credit and long-term debt on the ultimate shareholder interest expropriation behavior.However,there is no moderating effect on the impact of short-term debt on ultimate shareholders’ expropriation.When the size of the enterprise is small,the moderating effect of internal control quality on the impact of bank debt,commercial credit,long-term debt,and short-term debt on the ultimate shareholder interest expropriation behavior is not significant.The research conclusion of this paper can provide a reference basis for listed companies to improve their internal governance environment when formulating reasonable lending strategies for creditors.