State Mechanisms And Related Party Transactions On The Value Of The Company

After 20 years' development, the number of listed companies in domestic markets is more than 1500, majority of which are restructured from state-owned entrepreneurs, besides related party transactions are also very popular in domestic markets.The state-owned or non state-owned, with related party transactions or without related-party transactions, which one would hold a larger firm value? The answers for these questions will inflect directly the decision of investors, and also will provide fundamental support for regulators. In this paper, we focus on solving these problems with the method of statistics and econometrics analysis through the data from wind database and yearbook for listed companies.In this paper, we first introduce the fundamentals for the effects of ownership and related-party transactions for corporate value, and we precede systematic research using description statistics, simple statistics and econometrics on the influences of ownership and related-party transactions on corporate value and with the data for listed companies from wind database.We find that, after removing the effect of industry, state ownership and related-party transactions will have a negative effect on firm value, no matter we use the methods of statistics analysis and econometrics analysis, which shows that the agency cost from the managements and owners in state-owned companies will surely decrease firm value. The transactions between controlling shareholders and the listed companies works mainly as a channel for seizing interests of other shareholders, but not for decreasing transaction costs.Meanwhile, we also study what if there is stock options plan in state-owned companies, and what if the coexistence of significant related-party transactions and ordinary related-party transactions on for firm value. The results demonstrate that stock options for managements will significantly increase the firm value for state-owned companies, and the coexistence of significant related-party transactions and ordinary related-party transactions will significantly decrease firm value. Which further prove that state ownership and related-party transactions will damage corporate value.