The Research Of The Influence That Share Splitting Reform Exert On Ownership Structure And Corporate Governance

Because of the low cost of acquiring non-marketable share, these shareholders of China listed companies will tend to sell out their stocks after sharesplitting reform. On the other hand, most of the non-marketable share holdersachieve the liquidity of stocks by paying some of their own shares to themarketable share holders. So, the ownership structure of China listed companieshave already begun to change significantly. Many listed companies' ownershipstructure will be altered from concentration to decentralization.The relationship between ownership structure, corporate governance andcorporate performance has been the subject of an important and ongoing debatein the corporate finance and law finance literature. Till now, most of these studiessuggest that the modest ownership concentration indeed has significant positiveeffects on the corporate governance and corporate performance. They alsoinsisted that responsible large share holders may supervise the managerefficiently and solve the agency problem well. While, such a view has beenchallenged by some researches these studies argue that ownership structure isendogenous and there is no systematic relation between ownership structure andcorporate performance.Focusing on the ownership structure of China listed companies before sharesplitting reform, it is found that there are two basic characters. One of thecharacters is a high degree of ownership concentration, the other one is all ofstate share and legal person share are non-marketable. The unique ownershipstructure leads to many serious problems of China listed companies, such asagency problem, tunneling effect, insider control, incentive problem etc.After share splitting reform, the ownership structure of China listedcompanies will change significantly. All of the shares will be tradable and thedegree of ownership concentration will be lessened The new ownership structurewill be good for improving the corporate governance and corporate performance.However the final effect is influenced by some institutional factors, such as thelegal protection of investors, the development of capital markets etc.In summary, share splitting reform will solve the tunnel effect problem of China listed companies well, while a high level of share diffuseness may cause amore serious insider control problem. So, a modest share concentration isnecessary for China stock companies after share splitting reform.