Empirical Studies Of Ultimate Ownership Structure And Capital Structure

In 1932, Berle and Means proposed a dispersed ownership hypothesis declaring that the equity of company is not concentrated, but dispersed among minority shareholders. Based on this hypothesis, if the professional managers master the control of the company, the ownership and control of company would be separated. Since the view of separation was presented, the agency problem between investors and managers had become a hot issue in academic field. From then on, many scholars who study the agent theory put their focus on corporate governance theory. However, La Porta et al (1999) proposed a view that there exists an ultimate control in company. La Porta held different opinions towards the issue of the agency against Berle and Means. He put the agency problem on controlling the relationship between controlling shareholder and minority shareholders instead of traditional agency problem which is between controlling shareholders and professional managers.On the basis of this theoretical background, using 208 state-owned manufacturing companies listed in Shanghai and Shenzhen during 2007-2009 as samples, this article tries to analyse the ultimate ownership structure which is one of the main factors affecting capital structure of companies. The specific studies includes the relationship between the proportion of the ultimate controlling shareholders and the level of current liabilities of the company, the relationship between the proportion of managerial ownership and the level of current liabilities of the company, and the relationship between the equity balance degree and the level of current liabilities of the company. And added self-confidence indicators on the basis of the three alternatives variable degree, multiplying self-confidence indicators respectively with the Ultimate controlling shareholder equity ratio, the proportion of managerial ownership and the equity balance degree as interaction terms. They studied the relationship between the new variables and the level of current liabilities of the company. The result shows that the proportion of the ultimate controlling shareholders has significant positive correlations with the level of current liabilities of the company; when the managers are in overconfidence, the ultimate controlling shareholder of current liabilities and firm level was significantly positively correlated. The relationship between the managerial ownership and the level of current liabilities of the company was not significant; when the managers are in overconfidence, the relationship between the managerial ownership and the level of current liabilities of the company were significantly negatively correlated. The relationship between the equity balance degree and the level of current liabilities of the company were significant negative correlated; when the managers are in overconfidence, the relationship between the equity balance degree and the level of current liabilities of the company were not significant. It can be seen that level of confidence to some extent will affect the relationship among the original variables. Test results show that ultimate controlling shareholder restricted the behavior of managers. And the right of control can to a certain extent alleviate the agency conflicts between the ultimate controlling shareholders and corporate management. The presence of other large shareholders constrain the behavior of the controlling shareholder can slow the conflicts between the controlling shareholder and other small agency shareholders. The presence of ultimate controlling shareholder or other major shareholders of the company can supervision some of the wrongful acts, and may help reduce agency costs and improve corporate governance.