Fighting For Control Rights And Ownership Structure Optimization

A fighting for control rights of XGML has initiated by the news Xuzhou Construction Machinery Group Co.,Ltd( XCMG), the leader of industry ,which owns 100% of XGML's equities, would transfer 85% of its equities, a solely state- owned firm,to the Carly Group ,a private global investment firm. Furthermore,the Interim Provisions on the Takeover of Domestic Enterprises by Foreign Investors, which amended and adopted at the 7th executive meeting of the Ministry of Commerce of the People's Republic of China, were hereby promulgated and would come into force as of September 8,2006.In the thesis ,the writer, firstly, analyses abstractly the inherent logical relationship between ownership structure and corporate governance, on the basis of property theory and principle-agency theory, deduces that concentration of equities effects the efficiency of contest for control rights and mild concentration may be helpful to reduce the agency costs. Next, by an international comparison of equity structure the writer analyses the limitations of solely state-owned property shares of XGML,and the negative effects on corporate governance, whether compared with demestic samples or compared with multinational samples,the performances of XGML are weaker even though the total assets and shares of the demestic market have been in the first rank in industry. And then the writer studies the causes and the results of fighting for control rights of XGML, the writer thinks the private benefits of control are primary causes of fighting and testifies the upgrade of corporate value is one result of fighting. Considering the developing history of XGML, and the experiences coming from reform of state-owned firms in the past 20 years and the references of theoretical or empirical literature, the writer is sure that the ownership structure would not be optimized Unless XCMG transfer its control rights of XGML to non-state owned external investor; The design of uncontested ownership and control rights focuses on the incentive for majority shareholders,would reduce the agency costs but might lead to insider control and would increase the agency costs . The design of contestable ownership and control rights focuses on mechanism of the supervisal or restraints by fighting for proxy or control rights,would reduce the agency costs and improve the corporate value . And besides, the negotiability of equities is necessary for mechanism such as merger or takeover.The original idea presented in this thesis may be that the writer tries to probe into the mode of optimization for ownership structure of XGML, meanwhile , attach importance to market mechanism such as merger or takeover or proxy fight.And the writer is sure that the design of contestable ownership and control rights is optimization.Furthermore,the writer anticipates that it would improve the corporate value greatly if XCMG would transfer XGML's control rights to Sany Group.Since the industry of constrution machinery is the basis of the national economy, and most of native companies in this industry belong to state-owned enterprises who are weaker in the frame of global comprehensive competition because of their restricted of ownership structure; It is a prevalent and urgent problem how to promote the competitive ability by ownership structure optimizing . so the case of XGML may present a references for the other state-owned enterprises.