Equity Structure And Corporate Performance--Empirical Study On The Behaviors Of The Controlling Stockholders

As the property right basis of corporate governance system, equity structure determines the corporate right of control structure and then the structure and function of corporate internal governance, through which, equity structure can further affects the efficiency of the entire corporate governance. The influence that the controlling state-owned shares have on the corporate governance and performance in China is what this study tries to find. From the perspectives of ownership concentration, ownership diversion and ownership structure, this study examines how the corporate governance influences the enterprise performance. The statistic model is the variation of standard Coll-Douglas Production Function; however the new model reflects the continual growth of the enterprise output rather than just a static state. Using 865 panel data of 173 manufacture firms in China during 1997-2001, the paper finds that a certain degree of ownership concentration is favorable to the corporate governance and performance, and the influence of the largest stockholders' behaviors on enterprise performance is based on (1) the proportion of equities that they hold, (2) the nature of controlling ownership. It is argued that the state-owned shares have negative effects on the corporate governance, while if the controlling ownership is corporate equities, the firm will have stronger profitability generally. In contrast, the influence of publicly trade stocks is insignificant. The study provides some empirical evidence for the release of state-owned shares, ownership diversion, and the governance of listed firms, and also emphasizes the importance of ownership concentration and diversion to a certain degree.