Research On Characteristics Of Equity Ownership And Growth Ability Of Listed Companies In China

Why some companies can survive for so long time while others declined and died out so quickly? Which factors have played the significant role and how do they influence the companies? This is an important and cosmopolitan question, but neither the firm theory nor the empirical research gives a satisfactory answer. This is the theoretical origin of my paper. In fact, since the Reform and Opening-up in China, it has been over 10 years for the development of the financial market, then till now there are over 1,400 listed companies. Although these companies have shown great development in both size and quality, they are still far behind those in developed countries. At the same time, some listed companies which used to play a leading role in their industry, have become ST, PT companies. But we still find some were even forced to quit the market. Up to July 21 2006, there have been 36 listed companies which quitted since Shuixian became the first one. Meanwhile, the number of the ST companies has increased by 59. Why are there so many shooting-star companies in our country? Why they could not keep stable, healthy and sustainable growth? The writer considers that the distempered corporate governance is the decisive reason for the existence of them. There is little existing literature which combines the growth ability with corporate governance. That is why this paper will introduce the corporate governance into the dynamic environment of firm growth.This paper begins with the review on the existing literature. One is about the classification of the growth ability, including the gross classification with one financial index, TobinQ method, Clustering Analysis, Factor Analysis, Discriminant Analysis and so on. Finally a review on corporate governance research is given, including ownership structure and quality, such as empirical research on state-owned shares, traded shares, institutional investors, the largest shareholder and ownership concentration as well as non-government firms.It is the most controversial problem to divide the growth ability. It is difficult to choose between financial and non-financial indexes, between the single index and the composite index, also between the various methods. This paper has its own method. Based on the financial data form 2000 to 2004, we choose the increase on asset, net asset, long-term asset, operation revenues, operation profit and net profit as the growth measurement and of course they are standardized at first. Principal Component Analysis is used to get a Growth factor and the factor scores are calculated, which is the basis of ranking the listed companies. Companies whose growth factor scores are below the median in every year from 2000 to 2004 is labeled as High-growth company, and companies whose growth factor scores are above the median in every year from 2000 to 2004 is labeled as Low-growth company.Based on the existing literature and theoretical analysis, this paper proposes its own assumption. Binary Logistic model is used to examine the influence of ownership structure on firm growth dummy, controlling government and non-government firm, size, industry, the leverage and so on. The results show that there is a significant difference in the growth ability of government and non-government firm. Government firms are much better in some sense. As for the ownership structure(l)the share proportion of the largest shareholder has a significantly positive relation with firm growth;(2)A share is negatively related with firm growth; ( 3 ) institutional investors proportion has a significantly positive relation with firm growth.Chapter 5 summarizes the conclusion of the empirical study and brings up the related suggestions. Research limitation and future research fields are proposed as well.It shows that favorable corporate governance is the decisive factor which will enhance the competitive power of the firm and keep its sustainable growth.