Control Right, Ownership Right And Capital Structure Emprical Evidence

The capital structure theory was the core of corporate financial theory. And it was important for financial decision. In 1958, the paper about capital structure, the Cost of Capital, Corporation Finance, and the Theory of Investment, was published by Modigliani and Miller. Then MM theory became the base of financial management theory. Most scholars thought that the capital structure had the complex relationship to the corporate value. However, MM theory showed us that the corporate value had no significant effect on the choice of capital structure under some strict hypothesis. For the real world, it was not perfect. Integrating some institutional background, there were more and more researches on capital structure theory.Under the circumstance of marketing-economy, both stocks and bonds were the important financial methods for the companies. Both stocks and bonds were financial tools. Furthermore, they were different structure of control authority. It was the basement of control authority that stocks and bonds were. So the controllers would develop specific control construction according to their ownership proportions. In the capital market, the shareholders and creditors’ constitution was insistently changed through the securities transaction. Meanwhile the centralism or the dispersion degree will work on the formation of control authority structure.The choice of capital structure was important in financial management. Such as UK and the United States, the main conflict in companies was the conflict between managers and shareholders. However, in companies in Germany or in Japan, the big problem was the conflict between the inner controlling shareholders and the outer small shareholders. There were more and more studies showed that the ownership structure affected the capital structure. Under our special background, the most listed companies were controlled by the ultimate controllers, neither the direct controllers. The ultimate controllers used cross-holding or longer layers pyramid control in the control chain. The financial environment variable was one of the outer control variables, which was correlated with the choice of capital structure. Hence, this paper would trace to the ultimate controller and the separation of control rights and ownership rights. In order to protect the benefits of small stockholders, this article had both academic value and praxis significance.There were six chapters in this paper. The content in Chapter 1 was the exordium of the paper. Introducing the background of this topic, this paper indicated the significance of researching that the ownership-control rights divergence and financial market development affected the capital structure in our country. Then it pointed out the researching purpose and researching methods. And show us the frame of this paper. The content in Chapter 2 was a summary of the theories of the capital structure and research achievement. Introducing the central opinions, it would explain that the capital structure was the control structure in essence. The content in Chapter 3 was the theory analysis. The article elaborated the present situation in our country. The major stockholders would possibly control their authority through the change of the capital structure. The content in Chapter 4 was the empirical plan. There was the hypothesis, variable definition, model design and the selection of the sample companies. The content in Chapter 5 was the empirical evidence of the internal connection between the control structure and the financing policies, and the relationship between the financial market development and the financing policies. It pointed out that the financing policies were related to the property and the authority, and then it would affect the control structure. The content in Chapter 6 was the prospect research.In this study, the degree of market development for the listed companies located in different areas was significantly different. The article adopted cross-section data of 572 companies in Shanghai and Shenzhen in 2008, and applied OLS to empirically test how the ultimate controllers affect the choice of capital structure. The findings were as follows:(1) About 572 listed companies,44.3% of non-financial companies had the divergence of ownership-control rights.(2) The listed companies located in different areas had the different degree of financial market development. That significantly affected the choice of capital structure. In this article, we found that the degree of financial market development was positively correlated with long debt level.(3) The ownership-control rights divergence for the controlling shareholders was negatively correlated with long debt level.(4) The financial market development weakened the negative relationship between ownership-control rights divergence and long debt level.