The Impect Of Ultimate Ownership Structures On Cash Holdings

Since the concept"ultimate controlling shareholder"brought out by La Porta (1999), and scholars have found that there was a phenomenon of ultimate controlling shareholder of corporations in most of the countries and regions. The ultimate controller controlled the corporation by dual-class equity, pyramids-shareholdings or cross-shareholdings and leaded to a deviation between the control right and the cash flow right, which provides the opportunity for them to plunder the company. Then scholars of accounting field focus on the relationship between ultimate ownership shareholder structure and corporate finance.And the conflict between the inner controlling shareholder and the outer investors became the main conflict of our companies.Relevant literatures have suggested that ultimate ownership shareholder structure would affect capital structure, dividend policy and corporate performance.The most liquid asset-cash will be occupied by the ultimate controlling shareholder.This thesis will give the theoretical and empirical evidence on how do ultimate ownership shareholder structure affect cash holdings.This thesis provides evidence on the relationship between ultimate ownership structure and cash holdingss by adopting the sample of the1107companies listed in Shenzhen and Shanghai till Dec.31st,2009,using the data of ultimate ownership structures,cash holdings and corporate characters, applying methods like OLS.The results show that the ultimate ownership shareholder structure is an important factor affecting cash holdings.To be Specific,(1)Cash flow right of ultimate controlling shareholder is significantly negatively correlated with cash holdings,indicating that the interest of ultimate controlling shareholder and the company will tend to be same as ultimate controlling shareholder has more cash flow right.(2)Degree of separation of ultimate controlling shareholders’control right and cash flow right is significantly positively correlated with cash holdings.(3)The state-owned corporation holds more cash than non-state-owned corporation,which meets the hypothesis of "grabbing hand".(4)The more layers of pyramid, indicating of the pyramid ownership structure are more complex and the expropriation of the ultimate controlling shareholder is more hidden, the more cash will be held.(5) The proportion of the board related to the ultimate controlling shareholder is positively correlated with cash holdings,but not significantly. Because the board related to the ultimate controlling shareholder can not control the board of the companies.At the last part of this thesis,the author gives some suggestions on optimizing the Governance mechanisms and developing the marketing economy according to the results of the empirical analysis.