Study On Chinese Listed Companies' Ownership Concentration And Corporate Performance

In the past 30 years, the academia has made great progress in studies on the relation between ownership concentration, corporate governance and corporate performance. However, due to the complexity of the ownership structure, the comprehensive factors that it may be related to, and the difference in developing paths of different countries, the scholars'empirical examinations have different results as for the relation between ownership concentration and corporate performance: non-correlation, positive correlation, negative correlation and nonlinear correlation.Furthering this research is important in China. The biggest problem of Chinese listed companies is their poor efficiency of corporate governance and the consequent lack of good performance as a whole, to which bad ownership concentration attributes greatly. In the light of ownership concentration, this paper studies a sample of some Chinese listed companies, undertakes theoretical analysis and an empirical examination on this problem and puts forward relevant suggestions.In the theoretical analysis, we discuss how the ownership concentration impact the corporate performance by affecting the corporate governance mechanisms such as managerial incentive, proxy voting contests, supervision mechanism and hostile takeovers, and get the following conclusions: compared with highly dispersed or highly concentrated ownership structure, partial concentration of ownership with both controlling shareholder and a couple of other large shareholders existing is the best for promoting corporate performance.In the empirical examination, this paper analyzes the ownership concentration of 962 Chinese listed companies from 19 industries. As for the ownership concentration, 5 indexes, CR1 (the ratio of the first shareholder's share), CR5 (sum of the top 5 shareholders'share ratio), CR10 (sum of the top 10 shareholders'share ratios), H5 (sum of top 5 shareholders'share ratios'square), Z (the ratio of the first shareholder divide that of the second one) are selected and statistical described per year. As for the corporate performance, 4 indexes, ROA (return on assets), GPR (return from major business), EPS (earning per share), ROE (return on equity), are selected, analyzed by factor analysis and statistical described per year. As for the relation between ownership concentration and corporate performance, multivariable models are used for regression analysis.The empirical examination shows that Chinese listed companies'ownership structures have the following characters: Firstly, the share is relatively concentrated to the first shareholder, highly concentrated to the top 5 shareholders. Secondly, the relation between ownership concentration and corporate performance is hump-shaped. Thirdly, non-stated-owned first shareholder has advantage to stated-owned first shareholder for bettering corporate performance. Fourthly, balanced concentrated ownership structure has positive correlation with corporate performance.Based on the analyses above, we conclude that at the current stage, relative concentration of equities gives relative advantage in corporate governance to China's listed companies in the transitional economy. It provides sufficient stimulus and facilities for large shareholders to supervise their agents, reducing agency cost. At the same time, internal check and balance between big shareholders help to prevent looting by large shareholders and creates a state of mutual supervision, bettering corporate performance as well as protecting the interests of investors. Therefore we can reduce the shares of the largest shareholder, especially the state-owned shares as the largest shareholder. We can increase the shares of those who are institutional or individual investors representing diversified interests, to commonly create a relative equity restriction mechanism.Compared with the similar studies of this area in our country, the innovations of this paper are as following: Firstly, the selection and statistic method of corporate performance index are improved. Given the special situation of our securities market, rather than using Tobin's Q nor a single finance index, we select a group finance index and calculate an affecting factor by using factor analysis. Secondly, by selecting 4 years'panel data, we try to eliminate the influence of business circle to the empirical result. Thirdly, considering the complexity of the economy, we use not only ownership concentration but also some other variables, such as the industry and the company scale, as independent variables in the regression model. Fourthly, theoretical, statistical and empirical methods are all used in this paper.Ownership concentration is an extensive subject. What is achieved in this paper is only a preliminary and exploratory research into it. Limited by data, time and research ability, some viewpoints are not perfect and may even prove incorrect. However, the results of this paper may give some inspiration to the following researchers and still have theoretical and practical significance to the perfection of corporate governance system of listed companies in our country.