Correlation Comparison Of Managerial Ownership And Company Performance Between Before And After Reform Of The Shareholder Structure

There was no consensus of whether or not managerial ownership could solve or ease principal-agent problem which rises from separation of ownership and management rights. As China's not-tradable shares reform is completing, the contradictions between tradable shareholders and will be solved, and principal-agent problem between shareholders and management become more noticeable, so solutions are in hurry needed. And also, the government issued stock incentive management regulations to set rules and encourage listed companies to grant stock to their top management, and we believe that the purpose is to ease principal-agent problem.So, this paper will use China A share listed companies'2003, 2004 and 2006 data as sample, and use regression model, to analyze the effect of managerial ownership in two different methods. First, compare the correlation between before and after non-tradable shares reform, and the result is no significant growth. Second, test the correlation between management ownership and market value, and the result is also non-significant.There are four major reasons why correlation between management ownership and company performance and market value are not significant even after the reform. First, China corporate governance is not so good that decrease the effect of managerial ownership; second, managerial ownership is too low to incentive management; third, in early days, company treated ESOP(Employee Share Ownership Program) as a benefit not an incentive, so incentive effect is weak; last, the process that managerial ownership finally effects company performance and market value will not complete at a short time.Finally, this paper suggests three advices to enhance the effect of managerial ownership. First, improve the corporate governance to set a basis for managerial ownership works; second, sound capital market system and operation; and last, improve management stock incentive regulations and develop more kinds of stock incentive to increase management incentive flexibility and effect.