Research On The Largest Shareholder Effect On Corporate Performance

The ownership of modern corporations tends to be centralized while the traditional corporate governance theory based on highly separated ownership has been challenged by modern economy. Relatively concentrated ownership structure is becoming a typical character of the modern corporations and the major shareholders play an important role in corporate governance. Major shareholder's widespread existence indicates that analysis on the major shareholders is important to corporate governance and it's the questions on efficiency. In our country, most of the listed companies stem from restructured state-owned enterprises for its special single-largest-shareholder ownership structure. Comprehensive and systematic studies on large shareholders'behaviors and effect on corporate operating performance have an important implication for Chinese capital market development. This paper investigates the effect of the largest shareholders on corporate performance both the theoretically and empirically.In respect of theory, we summarized four theories of the ownership structure influence on corporate performance, and then analyzed the tow aspects of the largest shareholder's rights arrangement exert influence on corporate performance. The two aspects are the largest shareholder property and identity.In terms of empirical research, we construct an empirical model to explore the largest shareholder's rights arrangement, property and identity, the other major shareholders corporate performance impact on corporate performance. With data from Chinese security in 2007, we get the following empirical results. Firstly, it demonstrates a significant asymmetrical U-shaped relation between the largest shareholder's property and corporate performance. Secondly, the effect of the largest shareholder on corporate performance display district features as the largest shareholder is different in nature. When the largest shareholder is the state, it does worse than that of the non-state-owned in terms of performance. Thirdly, we found that companies with other major shareholders achieve better performance that those with effective the responsibility of monitoring the largest shareholder. Finally, due to lacking of the protection on the exterior investors, the property ration of debt to asset has significant negative relations with corporate performance.