Research On The Relationship Between Ultimate Shareholders Control And Encroaching Effect Based On The Listed Private Companies

In the recent years, more and more private companies choose to enter securities market to obtain the capital support, and now the private listed companies have become an important part of the stock market. The current research confirms the existence of ultimate controllers in the listed private companies, who take charge of the bottom of the listed companies through the control structure with the separation of control rights and cash flow rights. However, the separate structure makes the systemic conflict between the ultimate controllers and outer stockholders worse, what is more, the private corporate equity is clear, and can trace back to someone directly. As result, it is eager to study the relationship between the control structure and encroaching effect from the attitude of ultimate shareholders.First of all, this paper reviews the literature about the control structure and the theories, then, based on the current theories the model of tradition boxed pigs game is introduced into this paper to analysis the behavior of the controlling shareholders and the minority of the stock holders, according to which this paper divide the earnings into shared benefits and private benefits. Finally, given the factor of dynamic benefits the article improves the LLSV model of the controlling shareholders'benefits, and derives the corresponding systematic results between the ultimate control structure and the encroaching effect.With the listed private companies'data from 2007 to 2009, this paper verifies the relationship as follows:(1)The separate structure is very common among the private companies listed in Shanghai and Shenzhen stock markets, and the proportion is as high as 73.87%. Relative to the unseparate enterprises, the separate type ones have lower Tobin Q, ROA and EPS.(2)The connected transaction level of the separate companies is significant negatively related to Tobin Q, ROA and EPS, which indicates the related-party transaction is an important way to transfer the resource in secret, and has an obvious entrenchment effect.(3)It is convenient for the ultimate shareholders to get extra private benefits through associated business with the separate control structure. The control right and the separation between control right and cash flow right present a notable positive correlation with related-party transaction, but the cash flow right presents an opposite correlation. These results show that the control right possesses the capture effect, on the contrary the cash flow rights reflect more about supports. With the leverage effects the separate structure can make the ultimate shareholders use the least cash flow right to control the companies below, and the motive to gain private benefits increases with the separation degree of the two rights.