Financial Distress Costs and Ownership Structure in Listed Companies

Based on the data of financially distressed listed companies in China from 2004-2006, this paper measures the financial distress costs and examines the relationship between ownership structure and financial distress costs. The results show that the average financial distress cost is 17.27% and varies considerably among companies. It also shows that the nature of a firm´s controlling owner influences financial distress costs, which are significantly lower in stated-owned firms than in private firms, while ownership concentration and ownership balancing don´t have significant impact on financial distress costs.