An Empirical Research On The Effects Of Ultimate Controller On Capital Structure Decision In The Private Listed Companies

Several recent studies show that there are ultimate controlling shareholders in most companies around the world. As a basic feature of internal corporate governance mechanisms, ultimate control right and residual claim, but also enormously affects the corporate financial decisions. The separation of cash flow right and control right makes the ultimate controlling shareholders expropriate the corporate resource at the expenses of minority shareholders and listed companies for their private benefits of control. Thus it can create substantial conflicts between ultimate controlling shareholders and minority shareholders, as ultimate controlling shareholders can appropriate private benefits of control without incurring their fair share of the cost. In private-controlled listed companies of China, the ultimate controlling shareholders commonly use pyramidal ownership structures to separate cash flow right and control right, presence in the board and top management position is also commonly prevalent, which shows that dominant agency problem is between ultimate controlling shareholders and minority shareholders in private-controlling listed companies of China. Unlike previous research that focused on the direct controlling shareholders, this dissertation studies the effects of ultimate control right on corporate financial decisions from the perspective of ultimate controlling shareholders, which is the dominant idea and the feature of this dissertation.This paper uses the method of the theoretical analysis and empirical analysis. Firstly, the paper introduces capital structure theory, including static-off theory, corporate control theory and ultimate control theory, secondly reviews empirical literatures on the determinants of capital structure, then analyzes ultimate controller and capital structure characteristics of Chinese private listed companies, and analyzes how ultimate controllers affect capital structure with the models at last. In this study,the author conducts a research according to the data of 940 samples of private-controlled listed companies in Shanghai Stock ranging from the year of 2006 to 2010.The findings are as follows:(1) The ultimate control right is negatively related to asset-liability ratio in listed companies;(2)The cash flow right of the ultimate controller is negatively related to asset-liability ratio in listed companies;(3)The deviation degree between cash flow right and ultimate control right of the ultimate controller is negatively related to asset-liability ratio in listed companies;(4) Ultimate controllers can get benefit by being board chairmen or general managers;(5)Whether there is foreign shareholder does not have a significant influence on capital structure choice;(6)The value of ultimate cash flow right to control right of the ultimate controller is negatively related to short debt rate in listed companies. The deviation degree between cash flow right and ultimate control right of the ultimate controller is positively related to short debt rate in listed companies.