| Ever since the Reform and Opening, the private economy has been boosting and contributing enormously to the technology innovation, GDP growth and national employment, becoming the main force of Chinese economic development. Furthermore, the ultimate controlling shareholder structure is a widespread phenomenon in private listed companies. They are the controller of a enterprise, or even a commercial empire, while the pyramid controlling structure is the key of earning profit. The pyramid controlling structure features, like the ultimate controlling rights, cash flow rights as well as the separation degrees of the controlling rights and the cash flow rights, determine the differences of the ultimate controlling shareholders’voting rights, equity rights and personal rights, thus would influence their behavior with obvious managerial effect. The complicated and hidden controlling chain in the pyramid controlling structure makes the ultimate controlling shareholders’behavior unpredictable and concealed. Therefore, it is of great urgency both theoretically and empirically to investigate the ultimate controlling structure, providing the significant guidance of improving the regulation mechanism of listed companies as well as enhancing the management efficiency. As the carrier of all acts, the company would be influenced by the ultimate controlling structure in various criteria designed by the ultimate controller. This paper selects the most crucial act, financing behavior, together with the enterprise performance, as the angles to study the influence on the companies by the ultimate controlling structure. This paper is based on the previous prerequisite to study the features of the private companies’ ultimate controlling structures and their impact on the enterprises.The combination of theoretical analysis and empirical analysis were employed in this paper. At first, this paper introduced and reviewed the basic theories of the ultimate control right structure, the separation of ownership and control rights, as well as related literature, including the the theories of separation of ownership and control rights, of principal-agent, of incomplete contracts and of stakeholder. Upon fully understanding the reality and characteristics of the ultimate control right of the private listed enterprises in China, the basic concepts were analyzed deeply and the theoretical meanings of the separation of two rights in the ultimate control right structure were defined. Further, the mechanism, path and inner conditions by which the ultimate control right acts upon the corporate behavior were explained and the ultimate control right structure and its relatively systematic theoretical structure were developed. Next, the historical changes and the current status of the holdings right and the control right structure of the private listed enterprise in China were researched. At last, four common methods (i.e. pyramid structure, cross-shareholding, dual-class shares, and gaining the agency of management) for controlling the shareholders’rights of separation & control, cash flow right and gaining the extra control were compared.On the basis of the previous theoretical analysis, this paper continues to conduct an empirical research of the impact on corporate finance and investing decisions by Chinese listed companies’ ultimate shareholder structures. This paper collects the data revealing the companies’ ultimate controlling structure features including the listed companies’ revised shareholder structures, controlling rights, cash flow rights and the separation degrees of the controlling rights and the cash flow rights during 2010 to 2014.Together with the corporation financial data and the industrial data, using the capital Structure Partial Adjustment Model established my Flannery and Rangan (2006), this paper investigates the impact on the financing decisions by the ultimate controlling right structures.Firstly, the ultimate controlling structure has unobvious impact on the targeted capital structure in general. Secondly, according to the study on the separation level of the controlling right and the capital structure, the ultimate controller would support the enterprise under the benefit synergy with the increase of cash flow right and controlling right, which could improve the separation degree slightly. While when the separation degree goes up, the ultimate controller’s emptying behavior towards the enterprise would remarkably influence the capital structure decision making, which further boosts the separation degree in reality. Thirdly, there is a positive correlation between the cash flow rights, controlling rights and the capital structure adjustment speed. The increase of the former two factors would promote the supervision on the management by the ultimate controller, which in turn enhances the enterprise operation efficiency. With the increase of the separation degree, there will be an ever-greater agency conflict between the ultimate controller and the small-and-medium shareholders, in which the former party would devote more energy into the invading behavior towards the latter party, leading to lower operation efficiency. Plus, the existence of complicated controlling chain structure is popular in the high-separation-degree enterprises, meaning that the departure between the decision makers and the enterprises would decrease the decision-making efficiency, which would lower the capital structure adjustment speed.The efficiency investment estimation model, the residual term of regression estimation model and the non-efficiency investment yield found by Richard (2006) are introduced then, testing the hypothesis. Conclusions are drawn as following:there is a negative correlation between the ultimate controllers’ cash low rights and the companies’non-efficiency investment spending; the relationship between the controlling rights and the companies’non-efficiency investment illustrates an inverted U shape; the separation degrees of the controlling rights and the cash flow rights demonstrate an obvious positive correlation with the non-efficiency investment spending. On further investigation, in the high ownership listed companies, the impact of the separation degree of the two rights on the non-efficiency investment diminishes when the cash flow right occupies higher percentage; and this impact would be extremely significant when the cash flow right turns low, indicating a strong invasion motivation.The last section of the paper discusses the impact result of the company from the ultimate controlling right structure according to the performance evaluation. To complete the research, three differentiated benchmarks are introduced in this chapter to evaluate the company performance, which are ROE, EPS and TobinQ value. The conclusion sees that the cash flow rights of the ultimate controlling shareholders are positive correlated with the company performance; the ultimate controller’s controlling rights are correlated with the cash flow rights to some extent, this separation degree presents an apparent negative correlation with the company performance, proving the existence of the grabbing behavior of the ultimate controlling shareholders, indicating the "entrenchment effect" towards the company. The samples, then, are divided into the high ownership listed companies and the low ownership ones. The result discovers that the impact level on the performance from the separation degree is higher in the low ownership listed companies, possibly due to the synergy effect in high ownership listed companies, when the supporting effect from the ultimate controller could weaken the negative impact from the separation degree. |
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