The Ultimate Shareholder Control Problems In The Family Corporate Governance Research

In June1997, The Asian financial crisis broke out, which sets off the third globalwave of corporate governance revolution. It also contributed to the focus of theoreticalresearch turn to the issues-II agency problem from the issues-I agency problem, fromagency conflicts between shareholders and managers of the company to conflicts ofinterest between the major shareholders with medium and small shareholders. La Porta R.(1999) first proposed the concept of the ultimate shareholder control. It means that theultimate shareholder controls of the equity control chain by directly and indirectly heldstock to have actual control right of company. With the guidance of this concept, ClaessensS.(1999), and Faccio M.(2002) did a lot of ground-breaking research on the existence andbasic properties of ultimate shareholder control right, which form a fixed analyticalframework--equity control chain analysis paradigm. It also makes our scholars used tostudy of family corporate governance only from the perspective of equity control chain todiscover and parse ultimate shareholder control problems. But in our country, themanagement of the family business, especially family practice of corporate governance hasbeen influenced by the traditional Chinese culture. And the Chinese company law is not yetperfect leading to weak legal consciousness, so family corporate governance practice inour contry is a very complex issue. Based on equity control chain, we can not completelyfind out the hidden nature of the ultimate shareholder of listed companies. It’s difficult toreveal the real ultimate shareholder deep behind the scenes and to measure its actualcontrol degree of listed companies. It requires reconsidering ultimate shareholder controlproblems in the family listed companies. Whether the ultimate shareholder of familycorporate governance has some non-economic social factors influence to control listedcompanies? Currently, this phenomenon does exist. Researchers often unconsciously treatsocial factors and equity control analysis. So far, there are many scholars having found theintrinsic relationship between social factors and the ultimate shareholder control. Theynoted:"On one hand, we vigorously apply the equity control analysis of the ultimateshareholder deprivation problem, advocated using ’equity control chain’ to find andsupervise ultimate shareholder; On the other hand, We have a clear clear insight into theimportant role of social networks, traditional culture, routine forces in ultimate shareholdercontrol problems.So this paper forcus on ultimate shareholders control problems in the family corporate governance practices as the research object. Baesd on literature review and exploratoryresearch, it combines with the theory of social capital to build “social capital control chain”to make up the shortage of only application of “equity control chain”. Finally, it forms"dual" control chain analysis paradigm to solve such ultimate shareholder problems infamily corporate governance. And this paper uses the epistemology and methodology oforganizational routine evolution to explore how the ultimate shareholders "double" controlchain formed, which opens up a new path for resolving the ultimate shareholder controlproblems in family corporate governance. Its main work is as follows:(1) This paper gives the definition, causes, current status analysis of the ultimateshareholder control in family corporate governance. First, Based on the research literatureof family business, it sums up the concept and characteristics of family business. And then,combined with control right in corporate governance practice, it reveals that the ultimateshareholder control in family corporate governance is essentially an agency relationship.Finally, with research data of the ultimate shareholder control in Chinese family listedcompanies, the paper summarizes its current characteristics and reasons for the formation.(2) The ultimate shareholders "double" control chain analysis. With social capitaltheory and methods, it explains the inadequacies of the ultimate shareholder controlproblems based on equity control chain analysis alone, as well as the need for adding theultimate shareholder social capital chain analysis. On the basis of the equity control chainanalysis, the paper increases social capital control chain analysis and analyzes bycomparative method of two control chain’s strengths and weaknesses in ultimateshareholder control problems of family listed companies. Eventually, it forms the ultimateshareholders "double "control chain analysis paradigm.(3) Family corporate governance ultimate shareholder control analysis based onorganizational routine evolutionary theory. With the study of organizational routineevolutionary theory, the paper gives interpretation of corresponding relationship betweenorganizational routine and ultimate shareholders "double" control chain, and theirgeneration mechanism analysis framework. Eventually, it proposes two concepts, whichare equity control willingness and social capital control willingness of ultimate shareholderbased on the epistemology of organizational routine evolution, in order to build socialcapital controls iterative model to illustrate formation and evolution of ultimateshareholder "double" control chain.(4) Based on the analysis framework of fully revealing ultimate shareholder "double"control chain in family corporate governance with organizational routine evolution theory, it explores how social capital to affect organizational routine, which leads to generateultimate shareholder social capital control chain in the family corporate governance.(5) Empirical Analysis. With theoretical exploration, this paper uses questionnaires,data processing, statistical analysis and other methods to test and verify of theoreticalmodel and assumptions. Then, it expounds ultimate shareholder control problems in familycorporate governance by case studies, which is not only using equity control chain analysis,but need to add social capital control chain analysis. The application of ultimateshareholder "double" control chain analysis paradigm ensures the validity of results.Through in-depth system analysis and discussion, several important conclusions areas follows:(1) In family corporate governance, the ultimate shareholder tends to using equitycontrol chain and social capital control chain to ensure the ultimate control of family listedcompanies.(2) The ultimate shareholders "double" control chain is performance as organizationalroutine evolution. So it’s reasonable to use epistemology and methodology oforganizational routine theory to explain conformation and evolution of ultimateshareholder "double" control chain.(3) Through the impact of organizational routine, social capital generates socialcapital control chain of ultimate shareholder.(4) Using only equity control chain in analysis of ultimate shareholder controlproblems of family corporate governance often causes several deficiencies. In order toensure the validity of results, it is necessary to add social capital control chain by using"double" control chain analysis paradigm.