Study On The Family-controlled Listed Companies And Their Earnings' Quality

Since the middle 1990s, the researchers find that the agency problem between controlling shareholders and the middle-small shareholders begins to become prominent. The separation of cash flow rights and control rights is easily to become the main tool by which the controlling shareholders misappropriate the benefits of middle-small shareholders. Then, controlling shareholders probably manipulate the corporates' earning information for their misappropriation which indirectly influence the quality of the corporates' earning. The separation of cash flow rights and control rights is very popular in the chinese family-controlled listed companies. However, domestic researchers rarely make a research to the problem between the special structure because of the separation of cash flow rights and control rights in chinese family-controlled listed companies and the quality of these corporates' earning. Therefore, it is necessary for us to make an analysis of this problem theoretically and practically so as to reasonable advice to middle-small shareholders.Firstly, this paper reviews the foreign and domestic researches on the empirical evidence of the special structure because of the separation of cash flow rights and control rights and its influence. Then, basing on the introduction of the concepts of the family-controlled listed companies and corporates' earning quality, this paper make an analysis of the problem between the special structure because of the separation of cash flow rights and control rights in chinese family-controlled listed companies and the quality of these corporates' earning from the point of the agency relationship between the controlling shareholders and the middle-small shareholders. At last, using the model containing earnings reponse coefficient for testing the quality of corporates' earning and the empirical data of Chinese family-controlled listed companies in 2002 and 2003 to analyse the problem between the special structure because of the separation of cash flow rights and control rights in chinese family-controlled listed companies and the quality of these corporates' earning empirically.The results of the empirical analysis indicate that, In the case of the separation of cash flow rights and control rights in the Chinese family-controlled listed companies, the quality of the corporates' earning falls when the cash flow rights holding in family members falls.