The Research On Ultimate Controller's Foreign Residency Right And Corporate Risk-Taking

Risk-taking is the main way for firms to improve business performance and shareholder wealth,and is of great significance to promote long-term macroeconomic growth and technological progress.It is the focus theme of firm management and capital market.Under the ideal state of risk neutrality and sufficient resources,firms should choose all investment projects with net present value greater than zero according to the law of net present value,and do not give up any profitable investment opportunities,so as to achieve the goal of maximizing firm value and shareholder wealth.However,the real economic environment is full of uncertainty and information asymmetry.Decision makers are not risk neutral,and the resources used by firms for risk-taking are not unlimited and sufficient.Firm risk-taking will be disturbed by a series of factors.The risk attitude of decision-makers affects the choice of risk-taking,and the resource endowment of firms determines the upper limit of risk-taking.The existing research based on the perspective of decision-makers mainly focuses on the group of executives,and there is less research on ultimate controller who controls.As the winner of firm residual claim and the actual bearer of firm risk,the risk attitude and resource acquisition ability of ultimate controller directly determine firm's risk-taking decision.With the vigorous development of China's economy and the continuous growth of immigrant groups,it is common for high net worth people with private entrepreneurs to obtain foreign residency rights by means of house purchase immigration and investment immigration.The vicious escape of entrepreneurs has triggered a heated discussion among the public on preventing the risks of ultimate controllers and strengthening the protection of investors.The CSRC requires ultimate controller with the attribute of natural person to disclose the acquisition of foreign residency rights.There are significant differences in cognitive thinking,values,capital advantages and behavioral motivation between ultimate controllers with or without foreign residency rights,which has an important impact on the risk-taking of private listed firms.However,this impact may be competitive.There are both theoretical evidence of positive impact and theoretical evidence of negative impact,so that the impact of foreign residency rights on firm risk-taking needs to be empirically verified.In view of this,this dissertation attempts to take Chinese listed private firms as the research object to answer the following three key questions:(1)What impact will foreign residency rights have on firm risk-taking?Will it actively promote firm risk-taking,or will it reduce firm risk-taking(2)What is the specific action path of foreign residency rights on firm risk-taking?Will it affect firm's risk-taking through the two high-risk project decisions of firm outward foreign direct investment and innovation investment(3)What kind of value effect will the impact of foreign residency rights on firm risk-taking ultimately produce?Will it produce value-added effect or value damage effect?These three problems are interrelated and progressive.Outward foreign direct investment and innovation investment can be regarded as the intermediary path of firm risk-taking,which is an important supplement and enrichment to the research of risk-taking.Creating value for firms is the ultimate goal of risk project decision-making.The study of value effect responds to the problem of actually controlling the economic consequences of the impact of people's right of residence abroad on firm risk-taking.Based on the research idea of"risk-taking-action path-economic consequences",this dissertation carries out in-depth research,and obtains the following main conclusions:(1)Foreign residency rights has a significant role in promoting firm risk-taking.Compared with firms without foreign residency rights,firms with foreign residency rights have higher level of risk-taking.The research on influence mechanism found that the hypotheses of self-interest motivation of control,wealth dispersion motivation and resource advantage were established when explaining the promoting effect of foreign residency rights on risk-taking,and the risk transfer motivation had not been verified.This shows that ultimate controller with foreign residency rights may choose more high-risk projects to obtain greater benefits in the case of scattered personal wealth for the purpose of interest occupation and risk transfer.Further analysis shows that the legal system environment will weaken the impact of foreign residency rights on risk-taking;The participation of ultimate controller in governance will strengthen the role of ultimate controller's right of residence outside the country in promoting risk-taking;Compared with indirect holding,direct holding by ultimate controller will strengthen the impact of foreign residency rights on firm risk-taking;Foreign residency rights do not affect the long-term business intention of ultimate controller,which exclude the hypothesis that foreign residency rights lead to the shortsightedness of ultimate controller;Foreign residency rights outside the country is conducive to reducing the sensitivity of executive compensation performance and creating a relatively loose compensation contract environment for executives to take risks.(2)Foreign residency rights improves the probability of firms participating in outward foreign direct investment and helps firms achieve better outward foreign direct investment performance.Further analysis shows that firms' outward foreign direct investment plays an intermediary role between foreign residency rights and firms'risk-taking,that is,foreign residency rights can improve the level of risk-taking by improving firms' outward foreign direct investment;The difference of extradition attribute of foreign residency rights has a heterogeneous impact on firms' outward foreign direct investment.The positive impact of actual control of people's foreign residency rights on firms' outward foreign direct investment only exists in the foreign residency rights without extradition treaty;Ultimate controller with foreign residency rights is more likely to hire executives with overseas experience,and promote firms' outward foreign direct investment through the path chosen by executives.(3)The impact of foreign residency rights on the level of innovation investment is not clear,and there is no significant evidence.Foreign residency rights improves the innovation performance of firms.Further analysis shows that firm innovation performance plays a part of the intermediary role between foreign residency rights abroad and firm value,that is,foreign residency rights abroad improves firm value by improving firm innovation performance;The difference of extradition attribute of foreign residency rights has a heterogeneous impact on firm innovation performance.The positive impact of actual control person's foreign residency rights on firm innovation performance only exists in the foreign residency rights without extradition treaty;Ultimate controller with foreign residency rights plays an intermediary role in the transmission of transnational information and knowledge,and promotes the knowledge spillover from high innovation countries to low innovation countries.(4)The impact of ultimate controller's foreign residency rights on firm's risk-taking has a value-added effect,that is,ultimate controller improves firm's value and realizes the growth of firm value by improving firm's risk-taking level.The research conclusion of this dissertation suggests that relevant information users and researchers should correctly understand the role of foreign residency rights,not limited to the negative legal avoidance effect of foreign residency rights,and comprehensively understand the resource advantages and value impact of foreign residency rights,so as to lay a foundation for the accurate decision-making of information users.Investors and creditors shall focus on the foreign residency rights information of ultimate controller and effectively screen firm risks.Policy makers should recognize the differences in risk-taking decisions of firms with different characteristics of ultimate controllers,and guide firms to take risks reasonably.The regulatory authorities should make use of the information of foreign residency rights to implement key supervision over listed firms,so as to realize effective supervision over high-risk firms while saving regulatory resources.The research innovation of this dissertation includes the following aspects:(1)It provides a new theoretical explanation and empirical evidence for firm risk-taking behavior from the perspective of foreign residency rights.The existing research on the influencing factors of firm risk-taking not only examines the impact of the macro social environment,but also explores the impact of the micro firm level and the manager level.The research on managers is more carried out from the aspects of managers' age,gender,personal experience and other demographic characteristics,overconfidence and social network.Few literatures pay attention to the ultimate controllers and their background characteristics.Considering that foreign residency rights reflects both the willingness of ultimate controller to venture capital and the resource base of firm venture capital,this dissertation explores the influencing factors of firm risk-taking from the perspective of foreign residency rights,and expands the research framework in the field of firm risk-taking.(2)Combined with outward foreign direct investment and innovative investment,it enriches the research on the action path of foreign residency rights on risk-taking.As an important investment decision of an firm,outward foreign direct investment and innovation investment are not only related to the current capital investment of the firm,but also closely related to the future cash flow,which contains great risks.Based on the research on the impact of foreign residency rights on firm risk-taking,this dissertation further reveals the action path of foreign residency rights on firm risk-taking from the perspective of outward foreign direct investment and innovative investment,which is conducive to comprehensively deepen the understanding of the action mechanism of foreign residency rights.It is the enrichment and expansion of the research framework of foreign residency rights and risk-taking.(3)Foreign residency rights,risk-taking and firm value are brought into a unified research framework,which makes the research under this framework more full and accurate.The characteristic of ultimate controller is essentially the equity characteristic of the firm,which has always been the focus of corporate governance research.In the past,the research on the relationship between ultimate controller and firm risk-taking mainly focused on the equity characteristics such as the shareholding structure of ultimate controller,the separation of two rights and the nature of equity,and the research based on the personal characteristics of ultimate controller is relatively limited.The existing research on the economic consequences of ultimate controller's foreign residency right has not only reached negative conclusions,but also found positive effects.This dissertation focuses on the impact of the characteristics of foreign residency rights on firm's risk-taking,and on this basis,investigates the value effect of foreign residency rights on firm's risk-taking from the perspective of firm value,which not only enriches the research on ultimate controller and foreign residency right,It also provides new empirical evidence for the research under the framework of ultimate controller and risk-taking.