Chinese Enterprise Groups, Parent-subsidiary Corporate Governance Control And Subsidiary Performance Relationship Research

Nowadays, being universal and important, business groups are playing an significant role in our national economy. In business groups, parent companies' control are generally realized by subsidiaries' corporate governance. That's why this paper call parent companies' control as "governance control".As a core question in business groups, parent-subsidiary control has attracted much attention, and many foreign and domestic scholars have done some researches in different perspectives. Most of these studies are qualitative or case analysis, and few are empirical. Preceding achievements home and abroad provide necessary reference and guidance to this paper, but empirical achievements are really poor. Empirical research on relation between parent-subsidiary control and performance of subsidiaries in Corporate Governance perspective is meaningful. It will improve our understanding on parent-subsidiary control.Based on literature review and theoretical study, this paper sets up its study frame and theory hypotheses. Through regression analysis and hypotheses examination on 491 sample subsidiaries' 2005 data from Shanghai and Shenzhen Stock Market, this paper does an empirical research on the relation between parent companies' control and performance of subsidiaries. The study results show that:1.Parent companies in China can obtain control efficiently by subsidiaries' corporate governance, and comparing to their capital share they can keep more control fight by their expatriates which show that parent companies are active shareholders.2.A negative relation exists between parent companies' expatriate ratio and performance of subsidiaries, which reflects the negative effect of control by subsidiaries' boards of directors.3.Another relation between parent companies' control and performance of subsidiaries acts as U-formed curve, which shows performance of subsidiaries first declines then moves up when the extent of parent companies' control increases.4.There is a common "strong shareholders deprival" phenomenon in China, and it means parent companies tend to exploit the medium and small shareholders.