Research On The Problem Of Listed Subsidiary Companies Controlled By Business Group In China

The business group has a positive effect on improving its subsidiary companies'performance by reducing the companies'transaction costs. However, the parent corporation of the business group as a strong stockholder of the listed subsidiary company takes the advantage of internal market of the business group to transfer the listed subsidiary's profits, which exerts negative influence on the performance of listed subsidiary.The business group in China has become a main force which has been pushing national economy to grow rapidly for several decades. With the establishment and development of stock market, Chinese business group owned listed companies though the equity form. In the last few years, there is increasing number of parent corporations related with illegal behaviors of listed companies. People's attention was drawn to the relationship between identity of shareholder as business group and its influence on listed company.This article is concerning on the superiority and inferiority of parent corporation's control over its listed subsidiary. The result is based on analysis of the establishment of Chinese business group, the path of parent corporation control, and the means of management control under the circumstances of government policies and market development conditions. According to the theory, the article use date form Chinese security market to test assumed hypothesis, which will disclose the effect of parent corporation control.The result of test has turned out that the parent corporation's control over subsidiary company has more positive effects than negative effects. Nevertheless, parent corporation's"Tunneling"behavior and agency cost caused by government control has played a negative role in promoting the performance of listed company. Therefore, this article suggests that the path and the means of parent corporation's management control should be regulated. The parent corporation also has to identify its function and play an active role in governing its listed subsidiary company.