The GEM Companies Natural Person Indirect Shareholding Motives And Effect Analysis

Currently in the Chinese GEM, most of the corporations are holdings of natural persons, which means certain number of natural persons are the largest stockholders. In this kind of corporations, a widespread phenomenon that can be seen is the indirect holdings of natural persons, which means even though the largest stockholders are legal persons-the corporations, instead of natural persons, it is the natural persons that actually control completely the legal person-the corporate. There has been a large lack of researches on the indirect holdings of natural persons. From an ownership structure point of view, this thesis aims to firstly theoretically analyze and prove the intention of indirect holdings of natural persons and its effect on the firm performance, and secondly statistically analyze the practical effect of indirect holdings of natural persons. Theoretically the foundation is built from four main aspects, which are Transaction Cost Theory, Principal Agent Theory, Corporate Governance Theory and Behavioral Theory respectively. Statistically, the samples come from 183 corporations of the Chinese GEM, and 5 different variables are chosen to act as the variable of the firm performance, which are Return on Total Assets Ratio, Operating Profit Margin, Rate of Return on Common Stockholders' Equity, and Earnings per Share and Net Cash Flow per Share respectively. With these inputs the conclusion is drawn that the Return on Total Assets Ratio is negatively dependent on the indirect holdings of natural persons, but the correlations between the indirect holdings of natural persons and the other 4 firm performance variables are not statistically significant.