Empirical Analysis Of Split Share Structure Reform

Chinese financial market has gone through a process of economic restructuring, and stock right dividing is especially established against the backdrop of transition. One of the goals to building of our country' stock market is to serve for the reform of state-owned enterprises. At the beginning of establishment of the stock market, state-owned shares were not listed in circulation, which in fact formed a pattern of the splitting share structure. With the development of the stock market, the flaws of the split share structure exposed more and more distinctly and had become a fundamental factor constrained the development of the stock market. To solve the problem of split share structure, on April 29,2005,the China Securities Regulatory Commission issued a "listed company on the split share structure reform Pilot issue, "which formally announced China's share reform was launched. After two years, the reform of stock right splitting has achieved ultimately. Reform is a long-term strategy, the impact which the reform of stock right splitting exerts on the company's value and performance should be long-term.This paper uses the sample through 7 years to do the empirical research. The sample is the 730 companies which finished the reform between the beginning of 2006 and the end of 2006.Because, companies finished reform in 2006 is relatively more than any other year, moreover, it is reasonable to get more data through a long term to check the effect. This paper firstly analysis the drawback of stock right splitting as well as the necessity of reform, then it will find the change of share structure resulting from the reform of stock right splitting affect inner corporate governance, coupled with corporate performance. At last, this paper will make recommendations based on the influence of reform. Therefore, the contents of this dissertation are as follows:The introduction part gives a clear and concise introduction of the research background, purpose and significance, reviews the research situation and results in the reform of stock right splitting as well as corporate performance nowadays domestic and overseas then puts forward the research thinking, methods and the framework of the paper. The second part concludes the related theories of the reform of stock right splitting and corporate performance, then analysis the drawbacks of stock right splitting, contributing to the reform. The third part investigates the impact of the reform of stock right splitting on the corporate performance and generates hypotheses. It will analysis that the reform of stock right splitting would have significant impact on the equity structure, resulting in the corporate performance variations. Then the paper study the influence between the reform of stock right splitting and corporate performance based on the inner corporate governance and generate seven hypotheses related to the oversight mechanisms, excitation mechanism and dealership competition mechanisms. The forth part does the empirical research on the relation between the reform of stock right splitting and corporate performance. The paper establishes a multivariate regression model between inner corporate governance and corporate performance before and after the reform of stock right splitting based on the 730 listed companies, which finished the reform of stock right splitting and corporate performance, between January 2006 and December 2006, meanwhile draws the conclusion of empirical research. The conclusions are as follows:(1) The reform of stock right splitting can have long term impacts on the corporate performance. (2) The reform of stock right splitting improves the corporate performance. (3) There is no significant relationship between supervision mechanism of company and corporate performance. (4) The excitation mechanism has significant effect on the increase of corporate performance after the reform. (5) The dealership competition mechanism has no significant influence to promote corporate performance after reform. (6) Tobin'Q is more useful to study the effects of the reform of stock right splitting compared with other financial variables.The last part gives the recommendations on the basis of empirical outcome. The recommendations involve the external governance as well as inner governance to improve corporate performance. External governance includes improving supervisory system, laws and regulations, and cultivating the institutional investors in Chinese stock market, coupled with professional managers. Inner governance focuses on the development of equity structure, supervision mechanism, excitation mechanism and corporate culture. At the end of this article, it points out the problems that need betterment and extension, and gives out a farther research direction.