Government Intervention,Ultimate Ownership Structure And Efficiency Of Corporate Governance

Moral hazard and adverse selection have been the logic starting point of corporate management since Berle & Means found out separation of ownership and operation right caused internal control in 1932.However,ultimate shareholders were common in most listed companies except for America and Britain where ownership structure was distributed thanks to sound protection of laws to investors' interests according to the in-depth studies of ownership structure of 27 rich economies by La Porta et al.in 1999.In most cases,large families or the government took the principal control.And ultimate shareholders usually used small cash flow to get major control through methods of pyramid equity structure,cross shareholding or direct control of appointment power of board members,thus realizing excess control of listed companies.Since then,research of corporate governance has been focused on ultimate control right.As two main points to domain modern economy,where is the boundaries of the ma rket and government,People have always been looking for the right balance.Privatizati on and deregulation became important parts in leading government regulation under the background of the neo-liberal ideas in 1980 s.However,after the next more than 20 year s,the frequent financial and economic crisis makes the "laissez-faire" full of weakness.Whether the Southeast Asian financial crisis in 1997 or the globalized financial crisis in 2008,making people once again recall the "visible hand" under the heavy price,and hop e the government can turn the tide in the crisis,make up the shortcomings of the market.Sound development of companies is closely related to their market and non-market environment.In China,the government-leading market economic system serves as the most important part during a company's development.The Eighteenth National Congress of CPC put forward that “we should give full play to the decisive role of market in resource allocation and the function of the government at the same time.” It can be seen that it is of great benefits to invite government intervention to micro corporate management under the background of economic transition.It can help explain the problems faced by Chinese companies during development and also provide decision-making foundation for the government in terms of function transformation,streamlining administration and power delegation to lower levels.Ownership structure plays a significant role in corporate governance.It can decide how residual claim and residual right of control are distributed among shareholders.As the company grows increasingly larger,ownership structure gradually shows a three-dimensional development trend.Therefore,it may be somewhat prejudiced if the efficiency of corporate management is studied only from the perspective of direct shareholders.The research of ultimate shareholders should be also included.Only in this way,can we figure out the effect of ownership structure on corporate governance.How will government intervention affect company management? What kind of ultimate ownership structure positively functions in adjustment? How should we improve the management efficiency of China's listed companies? All these questions deserve in-depth discussion.This dissertation takes the efficiency of corporate governance as main object of study and government intervention as entry point.Mechanism of action between ultimate ownership structure and efficiency of corporate governance is theoretically analyzed and empirically tested.What's more,it explores how the interaction between ultimate ownership structure and government intervention influences the efficiency of corporate management.In the end,policy suggestions that are suitable for China's institutional system and can improve the efficiency of listed companies are proposed based on the research results.Empirical results indicate:(1)Government intervention is one of the main factors that affect the corporate governance efficiency of Listed Companies in China.(2)Government intervention effect is strengthened when state is the ultimate controlling shareholder and will be more significant with the increase of the shareholding.(3)The negative intervention from government will be suppressed,when private is the ultimate controlling shareholder and the inhibitory effect is strengthened with the increase in ownership concentration.(4)When institutional investors have a significant impact on listed companies,corporate governance efficiency is higher than the previous two,indicating that the introduction of institutional investors can improve the effectiveness of corporate governance to some extent;(5)Also,equity balancing is an important factor influences corporate governance efficiency,which is positively related to corporate governance efficiency.When the ultimate controlling ownership is state,more ownership balance means more suppressed negative intervention.(6)The higher the degree of separation caused by the unequal rights of residual claim and residual control,the more likely to lead to the ultimate control of the expropriation behavior,the lower the efficiency of corporate governance.This paper contributes in several ways:(1)In this paper,the government intervention is introduced into the research system of corporate governance and the transmission mechanism of government intervention to corporate governance efficiency is analyzed theoretically and tested empirically,which is helpful to enrich the theory of government intervention,and expand the research perspective and research field of corporate governance.(2)Based on the theoretical analysis and empirical test of the ultimate ownership structure and corporate governance mechanism,explore the interaction effects of government intervention and the ultimate ownership structure on corporate governance efficiency.Existing research on this issue is rarely involved,and the interaction is very complex.This article has carried on the exploratory research to this area,which has opened up the new field of corporate governance research.(3)This paper uses stock price growth rate / growth rate of the same period in the market " as the substitute variables of corporate governance efficiency in empirical research,which is more accurate and therefore,able to better reflect the real level of corporate governance.(4)This paper redefines the concept of ownership structure and stock structure,drawing a line between the ownership structure and the stock structure,enrich the theory of ownership structure;(5)Not only we classify the equity nature of ultimate shareholders based on state-owned and privately-owned research,but also,following the idea from the reform on mixed ownership,we specifically analyzes the listed companies on which institutions have a significant impact,which provides theoretical basis for the ownership structure optimization in the process of mixed ownership reform and complements to the corporate governance theory.The problem of corporate governance efficiency is a highly exploratory topic,which will be more challenging in the study of government-led economic background.The author has carried on the preliminary exploration to this problem.Due to the limitations of the author's level and cognitive ability,there are many places in the process of analysis and demonstration that need to be perfected,expanded and further deepened,which is the direction that the author needs to study in the future.