Relationship Study On Ultimate Control Rights And Business Performance For Listed Companies

Ownership structure, the core of corporate governance, plays a reasonably important role in maintaining managerial efficiency. In China, however, since the1990s, many research results have revealed the deviation of control and equity under pyramid or cross-shareholding structures in an increasing number of listed companies. Employing the2008-2012statistics of the listed companies located in Shanghai, the largest city of China, this dissertation adopts comparative analysis and regression analysis methods in studying the efficiency and performance of these special ownership structures. Based on the research conclusions, a number of policy-making suggestions are put forward.This dissertation shows that the control power of the ultimate controllers, as a major influencing factor, is related to corporate performance in a significant and negative way. This conclusion helps explain the craze to raise control power by building complex organizational structures. On the contrary, ownership power exerts a positive influence on performance, which is in line with the Alignment Effect. The conclusion of the dissertation reminds us that to fully understand the mechanism of ownership vs. control power, we should look beyond the statistics and dig into the ruling structure behind.The craving for greater control with less cash flow rights creates a cobweb of affiliated parties, which helps in developing industrial chains with stronger scale effect and better risk prevention abilities. But such a mechanism works better in those less-open economies, and may turns into its opposite when the enterprise needs innovation and growth or faces violent global economic impact. This dissertation claims that the wider the gap between ownership and control power, the lower the profitability of the related company. And such profitability could be improved when the actual controller exercises direct control.The state-owned background is positively related to business performance. We hold that with the government's focus on corporate growth and unremitted reform in property rights and management systems, the state-owned enterprises have been playing a supporting and leading role in both industrial advancement and profit-making. The shareholding counterbalance is positively relative to business performance, which is consistent with the call for checks and balances between minor and major shareholders. However, there is still a long way to go in implementing equal right for every share in China's capital market which is short of an all-round investor protection mechanism.Controller-act-as-executive is negatively correlated with operating performance. When the controllers pay more attention to the macro wellbeing of their reining territory instead of a specific company, the business performance must be negatively influenced. As a matter if face, this executives are in a better position to manipulate their operating results.Based on the above conclusions, we suggest that ownership concentration be moderately reduced and that ultimate controllers be encouraged to exercise direct control for a shortened control chain, lowered agency costs and a narrowed gap between ownership and control power. At the same time, the supervision over ultimate controllers should be intensified, and stock liquidity should be enhanced. Also important is the effort to develop a fully competitive market for professional managers.The structure of this dissertation is as follows:In Introduction, the research background is explained, followed by a brief summary of the development, the objective and the method of the research. The contributions of this dissertation are summed up from the theoretical as well as the practical aspects. Finally, key terms and concepts are defined.Chapter I gives a relatively full description of both international and domestic academic achievements on the correlation examination of ultimate control and corporate performance.Chapter II provides the basic theories for this research, including the enterprise property rights theory, the transaction cost theory, the control rights theory and the agency theory.Chapter III, employing the2008-2012statistics from the listed companies in Shanghai, digs into the correlation between the equity structure as well as the control configuration and the company's business performance through comparision and regression analyses.Chapter IV offers a number of policy suggestions on the basis of the empirical research conclusions and describs the possibilities for future studies.