A Study On The Relation Of The Managerial Ownership And Corporate Performance Before And After The Reform Of Non-tradable Shares

The principal-agent problem that caused by the separation of ownership and operating rights in the modern enterprise system is an important content of the study of corporate governance. Then how to reduce agency costs and improve operational performance has become a focus research problem both in theory and practice. Among them, the management shareholding has been the focus between domestic and foreign experts and scholars. Managerial ownership incentives have been proved by many foreign scholars. Because of the late development of the corporate governance, combined with the imperfection of capital market, there have considerable differences in the issue of managerial ownership among domestic scholars. Some of them believe that managerial ownership is conductive to the improvement of corporate performance,while others believe that with the increase of the proportion of managerial ownership,corporate performance tended to decrease, and some scholars believe that there is no correlation between the two. What impacts the managerial ownership has on the firm performance? Does it have any change after the reform of non-tradable shares? How to deal with the managerial ownership problem in future? This article will do some empirical analysis on the relationship between executive ownership and operating performance before and after the reform of non-tradable shares of listed companies to deal with these issues.This paper is mainly about the research on the relationship between ownership-and performance before and after the reform of non-tradable=shares in China, and the executives of listed companies which referred in this paper included directors, supervisors and other senior management staff referred in the corporate annual reports. To make the study more comparable, I selected the listed companies which listed before December 31st,2003 as sample companies, and use data in 2003 to 2004 as the sample before the reform of non-tradable shares, use data in 2007 to 2009 as the sample after the reform. As the listed companies has being reformed during 2005 and 2006, so I removed the data in these years. After explaining the principal-agent theory and the human capital theory which referred to managerial ownership and corporate performance, the paper analyzes the current situation about managerial shareholding before and after the reform of non-tradable shares, and construct the linear correlation model and nonlinear correlation model about the relationship between the proportion of managerial shareholding and the reform of non-tradable shares based on previous studies, do an empirical study between them.This article is divided into a total of five parts. The first part is an introduction, it introduced the research background and significance, defined the concept referred to the text, and explained the purpose of this study, content and research methods. The second part is theories, it described the principal-agent theory and human capital theory, and literature at home and abroad were reviewed. The third part is the empirical study design, I selected a sample according to certain requirements, and then proposed the hypothesis on the basis of previous research, compared each index about the dependent variables, independent variables and control variables and then selected the variable index in line with this hypothesis and the practical significance. Among them, screening executives stake(MSR),MSR^2 and MSR^3 as independent variables; earnings per share(EPS), return on assets(ROA) and the main business return on assets(CROA) measuring the corporate performance; selecting company size(LnAsset), asset-liability ratio(DA), the proportion of state-owned shares(CS), ownership concentration(CR) and the proportion of independent directors(IBR) to describe the control variables. Conjunction with the presentation of assumptions and selected variables, constructed the empirical model, laying the groundwork for the next chapter. The fourth part is the empirical research about the relationship between the proportion of managerial shareholding and corporate performance. Firstly it described the industry distribution of sample companies, and then analyzed the variables before and after the reform, according to previous empirical model, analyze the relationship and get the regression results. The fifth part is the conclusions of this paper, through the empirical analysis, it draws the following conclusions:(1) Corporate performance was significantly related to the proportion of managerial ownership before the reform of non-tradable shares, the relationship was inverted U-caved. (2) Corporate performance was significantly related to the proportion of managerial ownership after the reform of non-tradable shares, and the relationship was N-type curve. From the results from the empirical analysis, the optimal proportion of managerial ownership intervals is about 8%-10%. (3)The company size and corporate performance showed significant positive correlation both before and after the reform of non-tradable shares. (4) The asset-liability ratio and corporate performance which measured by EPS, ROA and CROA has emerged as a significant negative correlation. (5) Before the reform, ownership concentration and corporate performance showed a significant positive correlation, but the relationship between ownership concentration and corporate performance measured by EPS showed an inverted U-curve.According to the article conclusions, the author made several suggestions to improve the equity incentives system:(1) implement various forms of equity incentives; (2) develop and improve the manager market; (3) strengthen the supervision and restraint mechanisms.