The Control By Majority Shareholder And The Value Of Company: An Research Considering The Reform Of Non-tradable Shares

This paper mainly concerns the relationship between degree of control by majority shareholder and the value of company under immature and imperfect emerging stock market in China, and the influence of current Reform of Non-tradable Shares under implementation to this relationship. In addition, the majority of listed companies is state-owned holding, and also state-owned holding companies and other stock holding shareholders are different in nature and have different principal-agent link, so the effect of the nature of company controlling the majority shareholders is also the focus of research in this paper.Based on the samples of over 1000 listed companies at the beginning of Reform of Non-tradable Shares in 2004 and 2006, the share proportion CR1 of the largest shareholder, Z index calculated as the ratio of share ratio of top 2 shareholders and H10 index calculated as the sum of square of share ratio of top 10 shareholders, and Tobin'Q reflecting the value of target company are selected. The scale of company, financial leverage and the type of the largest shareholder are used as controlling variables. The empirical results from establishing regression equation indicates hypothesis on (?) type cubic equation is tested not significant, but it is significant under the hypothesis of U-shaped quadratic equation. The level of significance in year 2006 is higher than that of year 2004, this may be due to the reason that the average level of share ratio of the largest shareholder is relatively high and the value of company increases not so obvious when the share ratio of the largest shareholder is relatively low. And also, there is minor difference before and after Reform of Non-tradable Shares that indicates its effect to the market will be reflected in a relatively longer time. The hypothesis that state-owned company as the largest shareholder reduces the value of company is not significant, it is probably due to the reason that state-owned companies are usually of large scale and the influence of company scale is more substantial than the nature of the largest shareholder.