Study On The Economic Consquences And Choices Of CEMs Using By Corporate Ultimate Controllers

Ultimate control rights research is the main research paradigm in anlysing the interest conflicts between large shareholders and minority shareholders in companies with concentrated ownership structure. Control-ehancing mechnisms(CEMs) are the innovation perspective to study the exercise of ultimate control rights. So we will study the dynamic adjustment characteristics, the economic consequences and choice behaviors of CEMs including pyramid structure, single control and disproportionate board representation using by the ultimate controllers in China listed companies. Then we can get some empirical evidences to promote the ultimate controller governance, which has a important significance upon the protection of investors' interests and enhancing corporate governance.The thesis firstly develops the multi-dimension theory of ultimate control rights from the view of various CEMs, and measures the divergences between cash flow rights and control rights caused by three kinds of CEMs. Then the thesis builds an analysis framework based on China institutional background which can analyze the interaction between the natures of ultimate controllers, the characters of coporation and external marketization process. After selecting 922 A-share listed companies in non-financial industry as examples which have the same ultimate controller from 2007 to 2013, the thesis conducts empirical studies using fix-effect model with panel data.During 2007 to 2013, the ultimate controllers reduce the use degree of pyramid structure and single control but increase the use degree of disproportionate board representation. This trend of dynamic adjustments of CEMs is more significant in lised companies controlled by private ultimate controller in regions where the level of marketization process is relatively low. But the local governments in regions where the level of marketization process is relatively high increase the use degree of three kinks of CEMs in this period. These conclusions extend the research category of CEMs using from dynamic view.The empircal results about the economic consequences of CEMs using by the private ultimate controlle indications rs show as follows. The separations between two rights caused by pyramid structure and single control have negative correlation with corporations' market performance. At the same time, there is also a prominent inverse-U shape relationship between the separation degrees and corporations' market performance. But the separation between two rights caused by disproportionate board representation has no significant effect on corporations' market performance. The improvement of the level of marketization process and the future profitability of companies can alleviate the negative economic consequences of CEMs. But in companies controlled by government sectors, the separation between two rights caused by pyramid structure has positive correlation with corporations' performance. The separation between two rights caused by single control has negative correlation with corporations' market performance, and there is also a prominent inverse-U shape relationship between them. The separation between two rights caused by disproportionate board representation has no significant effect on corporations' market performance. The lower the level of marketization process and the administrative hierarchy of governments, the economic consequences of CEMs are more positive.The empircal results about ultimate controllers' choice behaviors of CEMs show as follows. The private ultimate controllers use pyramid structure and single control complementarily, and use disproportionate board representation alternatively with above two CEMs. The private ultimate controllers' choice behaviors endogenously derive from the controlled companies' characteristics and external market environment. Marketization influences the choice of CEMs through the channels such as corporate governance and external financing constraints. In companies controlled by government sectors, the ultimate controllers use pyramid structure and single control complementarily, use disproportionate board representation and single control alternatively. The ultimate controllers' choice behaviors are less affected by the character of controlled companies. State-owned capital investment and the quality of government public administration are themajor factors that influence the choices of CEMs. These conclusions reveale the differences in economic consequence and the pattern of CEMs combined application when the ultimate controllers use three CEMs simultaneously. After contrastive studies, these conclusions also extend the theoretical connotation about the CEMs used by state ultmate controllers.On these foundations, the thesis proposes some policy recommendations to govern the ultimate controllers of listed companies. We should take different governance strategies according to the nature of ultimate controllers. To the private ultimate controllers, we should continuously push forward China's marketization reform which would guide the private ultimate controllers to use CEMs rationally. The strategy of regulation for CEMs using by the private ultimate controllers should be "ex post regulatory review" to restrict the abusing of CEMs. But to the ultimate controllers of state owned companies, we need the top-level design to guide the using of CEMs. After all, these are urgent to reduce the degree of single control and enhance the disclose of CEMs for the two kinds of ultimate controllers.