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영어

In this study, we investigate the relationship between the ownership of controlling shareholders and the proportion of bank loans in total debt. According to the literature, when the ownership of controlling shareholders is large enough, it incentivizes the controlling shareholders to pursue their private interests. If it is low, however, outside investors and other stakeholders, including the governance system of the company, prompt the managers of the company to maximize the firm value (Demsetz, 1983; Fama and Jensen, 1983; Morck et al., 1988). Thus, there is anon-linear relationship between the ownership of controlling shareholders and the firm value that is, until a certain level of executive ownership is reached, it increases the firm value, but if it exceeds a critical level, the firm value decreases due to controlling shareholders’ pursuing their private interests (Stulz, 1988; Morck et al., 1988; McConnell and Servaes, 1990; Kim, 1992). According to the theories that controlling shareholders behave differently based on their ownership, in this study, we test whether there is a non-linear relationship between the ownership of controlling shareholders and different debt capital choices. We empirically confirm that the ownership of controlling shareholders has a non-linear relationshipwith the proportion of bank loans in total debt. Specifically, the controlling shareholders whose ownership is below (above) a certain level prefer (accept fewer) bank loans. We also consider the firm characteristics and the level of monitoring when investigating the relationship between the ownership of controlling shareholders and debt capital choices. Our analysis shows that a firm in financial distress seems to avoid the use of bank loans even when the ownership of controlling shareholders is low. We argue that the controlling shareholders of a firm in financial trouble are more likely to follow their private interests and evade the tight monitoring of the banks providing the loans (Johnson et al., 2000; Lin et al., 2013). Our investigation also addresses how a company’s age affects the relationship between the ownership of controlling shareholders and debt capital choices. If a firm is older and the ownership of controlling shareholders is high (low), a bank loan (public debt) is preferred. To analyze the effect that monitoring has on debt capital choices, we use several important proxies for monitoring, such as the ownership of foreign investors, institutional ownership, and the presence of multiple large shareholders. The test shows that foreign investors seem to effectively monitor firms, such that when foreign ownership is large enough, the improved monitoring encourages firms to take more bank loans (Baek et al., 2004; Shin et al., 2004). When there are multiple large shareholders, the ownership of controlling shareholders is positively related to the proportion of bank loans in total debt, even over the critical level of controlling shareholder ownership. We interpret this result as follows. Multiple large shareholders can monitor a firm and its controlling shareholders (Maury and Pajuste, 2005), which prompts the firm to use more bank loans despite the fairly large ownership of controlling shareholders. Finally, we implement additional analyses for robustness checks. We investigate the endogeneity between a firm’s ownership structure and its debt capital choices using a causal analysis. The investigation verifies our hypothesis that although the ownership of controlling shareholders affects debt capital choices, the latter does not affect the former. In addition, our results hold with different methods of inference, such as clustered error estimation or Fama and MacBeth’s (1973) method. Therefore, we confirm our hypothesis that a firm with less ownership of controlling shareholders takes more bank loans than one with more ownership. This study contributes to the literature in the following ways. First, we apply Panano and Roell’s (1998) theory on the decision between IPO and block sales of equity to debt capital choices. They argue that controlling shareholders consider the benefits and costs of IPO compared to the injection of new equity capital through other large shareholders. The cost of IPO is the listing cost and the benefit is less monitoring by diverse minority shareholders after the IPO. We apply this theory to debt capital choices and empirically verify it. Second, we expand on Lin et al. (2013) by including the ownership of controlling shareholders as a main variable in our investigation. Lin et al. use a wedge in their study and find a linear relationship between it and debt capital choices, whereas we find a non-linear relationship between the ownership of controlling shareholders and debt capital choices. Third, we consider the level of monitoring in our main investigation. Extant studies include a firm’s characteristics, but not the level of monitoring, in this vein of research. Fourth, the Korean financial market is one of the best testing platforms from which to observe controlling shareholders’ behavior, especially the pursuit of private interests, as most companies have concentrated ownership structures and are included in conglomerates known as “Chaebols.”

한국어

본 논문에서는 지배주주 지분율과 은행차입금 비율 간에 어떠한 관계가 있는 지에 대하여 분석한다. 분석결과, 지배주주 지분율과 은행차입금 비중은 비선형관계가 있는 것으로 나타났다. 즉 일정 수준 미만의 지배주주 지분율이 있는 기업의 경우에는 은행차입금을 더 선호하는 반면, 일정 수준 이상으로 지배주주가 소유하고 있는 기업의 경우에는 은행차입금 비중이 유의적으로 감소하는 것으로 나타났다. 이는 지배주주 소유지분율이 낮은 기업에서는 비용 감소를 통한 기업가치 극대화를 위해 은행차입금을 선호하는 반면, 지배주주가 상당한 수준의 지분을 가지고 있는 경우 지배주주는 은행차입을 통하여 자금조달비용을 절감하는 것보다 은행차입으로부터 발생하는 모니터링을 회피하고자 하는 유인이 더욱 강한 것으로 해석된다. 한편 기업특성을 고려하여 지배주주 지분율과 부채종류의 선택간의 관계를 분석한 결과, 재무적 곤경이 상대적으로 높은 기업은 지배주주 지분율이 낮은 구간에서도 은행차입을 회피하는 결과를 보였다. 한편 기업연령이 높은 경우 지배주주 지분율이 높은 구간에서는 상대적으로 은행차입을 선호하고 있으며, 지배주주 지분율이 낮은 구간에서는 공적부채를 선호하는 결과를 보이고 있다. 또한 다수의 대주주가 존재하는 경우에는 지배주주 지분율이 일정수준 이상인 경우에도 은행차입금 비중이 증가하는 것으로 나타났다.