Controlling shareholder, expropriations and firm's leverage decision: Evidence from Chinese Non-tradable share reform

► We examine effect of excess control rights of controlling shareholders on leverage. ► More excess control rights increase leverage and tunnelling activities. ► Both excess leverage and tunneling decrease after the Non-tradable shares reform. ► Market also reacts more positively to announcement of related party transactions after the reform. ► Controlling shareholders borrow excess debt to tunnel if legal system is weak.