Study On Ownership Structure And Investment In Chinese Listed Firms

The function and efficiency of ownership structure in corporate governance is an important issue in corporate finance studies. The type of ownership structure stands for not only the cash flow that one can get, but also the residual claim rights and residual control rights. After 90th in the last century, as the area of corporate governance studied expanding, and the hypothesis that all the shareholders are the same breaking, the conflicts among large shareholders and minority shareholders in concentrated ownership structure become the core issue in corporate governance. With the changing of the core issue in corporate governance, more and more attention has been put into the issue how the pursuit, formation and distribution of private benefits of control by large shareholder will affect the finance policy in corporate.The aim of the study focuses on how ownership structure will affect corporate investment under the background of transition and rising economy for three reasons:①To answer the question that what is the most efficiency ownership structure, most scholars has put their effort on the relationship between the ownership structure and corporate value. The results of these studies are widely divergent although abundant. Corporate value is the sum value of the asset in place and the discounted of future cash flow (Myers, 1977), thus, investment is the link between ownership structure and corporate value in the perspective of value creating. The study of the relationship between ownership structure and investment will help us to clear the fog.②More and more studies have revealed that the controlling resources arise from current capital and real asset are the important source of private benefits of control(Pagano and Roel,1998). The collocation and scale of controlling resources is related to how the controlling shareholders get private benefits of control. Further, the corporate investment is highly associated with private benefits of control.③Comparing with the expropriation of controlling shareholder, the minority shareholders'benefits will be damaged more by the inefficiency finance policy, which arising from controlling shareholders'pursuit of private benefits of control. So the inefficiency finance policy should be put more attention to (Martin and Peter, 2007).This paper includes of nine chapters, and the contents are listed below: Chapter 1 is introduction. It proposes the issue, the angle and the methods of the research, introducing the"relative principle", and thus offers the theory foreshadowing and the analytical prerequisite for the following research.Chapter 2 is review of literatures. After reviewed the developing of investment theory, two kinds of agent problem and how it will affect corporate investment is reviewed and commented.Chapter 3 is the analysis of system background. This part discussed the evolvement of investment and finance system of the corporate in China, the developing of securities market, the governance characteristic of listed companies and the law frames of the investment of listed companies.Chapter 4 is the analysis of controlling structure based on ownership structure. This part introduces oceanic games model, and analyses how the control right will allocate in listed companies, including the power balance mechanism. Also we set Shapley-Shubik index based on oceanic games, and computes shareholders'power in listed companies of different ultimate ownership by computer simulation, which laid the groundwork for the next study in method and practice.Chapter 5 is normative study. It utilize the analysis framework of Myers-Majluf(1984), to analyze the corporate investment behavior under the control of large shareholders in monopolistic ownership structure and balance-power ownership structure. On the other hand, it analyze the relationship between private benefits of control and inefficient investment in listed companies, and compare the corporate values in different ownership structure, such as dispersible ownership structure, balance-power ownership structure and monopolistic ownership structure.Chapter 6 is empirical study. This part divides the controlling degree of the largest shareholders to 3 sections exogenously by threshold panel model, then it analyze the nonlinear relationship between the controlling degree of the largest shareholders and inefficient investment. Further, this part does the above analyze in four different ultimate ownership, including central government controlling, province government controlling, county government controlling and non-government controlling.Chapter 7 is the test of economic result. This part evaluates the listed companies'investment return by Marginal Q and EVA (economic value added). Also it utilize the generalized method of moments (GMM) estimators which is suitable for the model including endogenous variables and"large N, small T"sample. Based on the studies in chapter 6, this part studies how the ownership structure including large shareholder control, identity of ultimate ownership and power-balance among large shareholders will affect corporate investment return.Chapter 8 is policy advice. Under the analysis of the chapters above, this part put forward some policies to weaken the inefficient investment in listed companies, including improving corporate governance, mend the law system and so on. Chapter 9 is summarizer. This part discusses the shortcomings of this paper and shows the directions of study in the future.The new point of this paper includes:①This paper utilize the oceanic games model which is based on cooperation game theory。Based on the oceanic games model, this paper analyzes the allocation of shareholders'power and the mechanism of power-balance in listed companies. And this paper also studies empirically the power index of listed companies'shareholders and power-balance situation in China by Shapley-Shubik index based on oceanic games. Comparing to the various power computing methods in present, oceanic games considers not only all the shareholders, including large shareholders and minority shareholders, but also the different roles of large and minority shareholders, simulates the power allocations in listed firms accurately. We also improve the traditional computing methods of Shapley-Shubik,accurately and efficient.②The influence of the controlling shareholders'pursuit for private benefits of control on corporate finance policy is an important issue which will be worth studying in present and future, but most of these studies in present considered the private benefits of control to be a negative role in corporate governance and focus overly on its negative influence on corporate value and minority shareholders'benefits, especially in domestic. In this paper, we found that private benefits of control may be necessary for controlling shareholder, and it is a compensation for controlling shareholders'liquidity loses and monitor cost, sometimes private benefits of control may be positive for investment efficiency and corporate value, and minority shareholders will benefits from it. Just as Leff(1964) has said that corruption may help facilitate economic development when very inefficient bureaucracies are in the way. So we renew the understanding of private benefits of control, and suggest that private benefits of control can be divided into necessary private benefits of control and extra private benefits of control.③As the nonlinear relationship between ownership structure and corporate investment, the methods that employ in present to find the threshold is subjective and controversial. This paper studies the nonlinear relationship by threshold panel model, which is objective and efficient. This method also improves the stability of the empirical result and also avoids the multilinear.