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《Nankai Business Review》 2010-01
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Bidirectional Capital Impropriation and Capital Investment of Listed Companies

Zhu Song,Chen Chao,Ma Yuan Beijing Normal University,Fudan University,Tsinghua University  
In recent decades,related transactions are heavily criticized by scholars and regulation authorities since related parties of a listed company may "tunnel" the resources of that listed company,damaging the interests of other stakeholders.And one kind of the "tunneling" is the capital impropriation,which is common and severe in emerging market where the investor protection is weak.In contrast,a listed company may also impropriate capitals from its controlling business group or related parities reflected as accrued liabilities in the financial statement of the listed company,which can be considered as the "supporting hand" from related parties.Thus,the capital impropriation may be bidirectional.Inessentially,the capital impropriate is a financing behavior with low cost,and it can provide necessary working capitals for some firms and reduce that for the other.Since the working capital is an important part of the firm's stock of capital,which can be thought of as relaxing firm's short-run financing constraints,it may significantly influence firms' capital investment behaviors.Using the data of Chinese listed firms in 2005 and 2006,this paper investigates the effect of bidirectional capital impropriation on listed firms' capital investment efficiency.We find that receivable items like accounting receivable or other accruals that related parties owe to the listed firms will reduce the capital expenditure of listed companies and reduce the sensitivity of investment-cash flow relation.Actually,capital impropriation by listed firms may stimulate their capital investments and increase the sensitivity of investment-cash since listed firms obtained lower cost of capitals available for future investments.In all,the bidirectional capital impropriation significantly affects the capital investment and sensitivity of investment-cash flow of listed firms,and different direction of capital impropriation will lead to different investment efficiency.We also should note that capital impropriation is not always necessarily a bad thing since it may reduce the overinvestment sometimes.
【Fund】: 北京师范大学青年教师社会科学研究基金项目;; 教育部人文社科重点研究基地重点研究项目(05JJD630036);; 国家自然科学基金项目(70772017)资助
【CateGory Index】: F275
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