Control Righs,Cash Flow Rights And Corporate Performance

With the development of capital market and improvement of the qulity of listed companies in China, the pattern of corporate control rights is playing an more and more important role on the corporate financial performance, However, how to prevent the ultimate controlling shareholders tunneling listed company with the aim to private benefits has attracted the wide attention in the practice. From the perspective of ultimate ownership, this paper first investigates the controlling structure of effective controller in chinese private listed companies and some related theoretical questions, then examine the relation between controlling structure and operating performance from the three levels of product or service operating,assets operating and capital operating respectively for the purpose of finding out the common paterrn of private benefits.Due to the popularity of pyramid and cross-holding in chinese Private Listed Companies and the separation between control rights and cash rights, this paper does a measurement of cash flow rights,control rights and the separation rate between them on the basis of ultiamte ownership; makes an anlysis of control right's cost and benefits,the condition of attaining for private benefits and the ways to private benefits. In conjuction with non-continued company situation, this paper constructs an theory framework of company value creating process, especially explores the value creating principle of free cash flow and the real option value of non-operating assets,deeply study on the controlling structure and operating performance indicators such as ROIC,Cash rate,Cash dividends payout rate,finally, characterize chinese private listed companies controlling structure and make a compare internationally, and take delong corporate for example, conclude the intrinsic reason as private benefits.On the basis of the above theoretical and situation analysis , this paper proposes a series of hypothesis about the relations between controlling structure and performance from the three different levels of operating,asset and capital respectively. We employ CCER database to produce our sample about the effective controller's control rights,cash rights and the separation rate of 150 private listed companies,during the five years of 2003-2007, use various econometric tools to conduct direct and indirect tests on the above hypothesis, disclose whether the private benefits exists in private listed companies,and if so, what is the means to the end?On the level of product operating, the paper carried empirical study on the relationship between Return On Invested Capital(ROIC) and controlling structure. The results show that control rights mainly have the convergence-of-interest effect , especially in the panel of comparative controling, while the effective controller entirely control the company, maximizing the company's size would be their common motive and choice. It is not found that the direct evidence of the expropriation effect is significiently exist.On the level of assets operating, this paper takes the most liquidity asset—cash as example and examine the relationship between cash holding ratio and controlling structure. The results show that control rights are the major influence in the asset operating decision, particually in the decision of cash holding ratio.concretely, as the control rights increase, the cash holding ratio rises significiently. In the panel of m&a, when the control rights is higher than 42.2%, its influence on the cash holding ratio is positive, conversely, when the control rights is lower than 42.2%, the reverse is ture. Futhure examination shows that the degree of excessive cash holding would rise as the cash rights increase. On the other hand, control rights may relieve the degree of shortage of cash holding ratio. Lastly, we don't found any evidence for excessive cash holding due to expected growth opportunity.On the level of capital operating, we first analyze the preferrence of cash dividend payout in chinese private listed companies qualitatively, and then employ the one-way ANOVA and nonparametric tests, the results show that the preferrence of cash dividends payout and control structure have no significiantly relation. However, when we examine the such quantitative variables as the ratio of cash dividend payout and employ the correlate and regression anlysis tools, it is found that the cash dividend payout ratio and cr2 have significantly positively related, meanwhile, the cash dividend payout ratio have no relation with various kinds of financial ratios yet, such as ROIC,cash holding ratio,operating cash flow per share and growth rate etc.in addition, we find out that during the year of 2005-2006, cash dividend payout ratio systematicaly increase, so the conclusion comes down that effective controller make cash dividend decision only in the short term for the private benefits. Given the management appointed this the expropriation effect would be a bit lower.Eventually, based on the theoretical evolution and situation analysis, this paper comes to the following three enlightments:the first is to construct various levels capital market and help the private companies with socialization process, the second is to perfect the information disclosure system and improve the governance function of capital market, the last is to establish the sustainable growth principle and enforce this capacity.Although the paper has studied control structure and financial performance entirely, due to the complexity of control rights, the further study would be necessary in the future.