A Correlation Study On Ownership Structure And Governance Performance Of Security Companies

In recent years, international capital markets are in turmoil, the sub-prime crisis, the U.S.debt crisis and European debt crisis are one after another. The crisis has a huge impact on theinternational capital markets. China’s capital market fell into the doldrums too. As animportant intermediary in the capital market, how do the security companies operate? The U.S.sub-prime mortgage crisis conducted to investment bank’s bankruptcy and collapse. It spurredmy nerves that the security companies in such developed capital markets can have suchserious problems. Which aspects should China’s security companies pay attention to in thegovernance?China’s security companies are undergoing rapid changes, on the basis of the thinking ofpresent situation and reading lots of relevant literatures，the paper makes an empirical studyon the ownership structure and governance performance of China’s security companies. Thepaper studies not only from the theoretical analysis aspect that ownership structure influencesthe governance performance under the different ownership concentration and different equitycharacteristics, but also demonstrated the relationship between the two through the empiricalanalysis. To solve the excessive concentration of ownership structure of our country and thelargest shareholder with the state-owned property, many scholars proposed to introduceprivate capital and put the company on the market to optimize the governance. The paper alsoconducted a comparative analysis of governance performance between the company whoselargest shareholder is state-owned and that of private capital and a comparative analysisbetween the performance of listed security companies and that of unlisted security companies.These compares aim to demonstrate the applicability and effect of the recommendationsproposed by the prior expert and scholars. This paper contains five chapters; each chapter isorganized as follows:Chapter 1 introduction, it describes the background, the significance of the study, train ofthought, methods, frameworks and innovation.Chapter II reviews the theory and the literature. The ownership structure theory andprincipal-agent theory are reviewed, and make a review to the domestic and abroad literatureabout ownership structure and governance performance.Chapter III Development of China’s securities companies, securities companies aredivided into five development stages. In the process of development, private capital goes intosecurity companies, security companies of Sino-foreign joint venture are founded, some security companies go to the market by backdoor listing or initial public offering. Then thepaper points out some problems of the shareholding structure of China’s security companies.It has some feathers in the governance:”the more concentrated ownership structure”,”explicitstate-owned property”,”the liquid of shares are inactivate”and so on.Chapter IV the empirical research, five hypotheses are put forward according torelevance theories and research findings: First, share ratio of the largest shareholder has apositive relationship with the governance performance. Second, ownership concentration hasa positive relationship with the governance performance. Third, equity balance index has anegative relationship with governance performance. Fourth, the largest shareholder ofstate-owned shares of the security companies’performance is better than that of privateshareholders. Fifth, the performance of listed security companies is better than unlistedsecurity companies. In the empirical part, 84 security companies are selected as study sampleand research data comes from the Security Association of China website where the securitycompanies disclose the financial report. The net return on capital is selected to measure theperformance variable. Share ratio of the largest shareholder, share ratio of the top threeshareholders and the equity balances index are selected to measure the ownershipconcentration variable, control variables are company size and financial Leverage, which aremeasured by logarithm of company size and asset-liability ratio respectively, then establish amodel for the study. An empirical analysis on security companies’ownership structure andgovernance performance are made through descriptive analysis, correlation and regressionanalysis and the hypotheses are verified.Chapter V conclusion, the conclusions of the study are summarized. First, share ratio ofthe largest shareholder has a significantly positive relationship with the governanceperformance. Second, ownership concentration has a weakly positive relationship with thegovernance performance. Third, equity balance index has a negative relationship withgovernance performance. Fourth, the largest shareholder of state-owned shares of the securitycompanies’performance is slightly better than that of private shareholders. Fifth, theperformance of listed security companies is slightly better than unlisted security companies.The two control variables, capital size and asset-liability ratio have a significantly relationshipwith the governance performance. Finally, the inadequacies of the research are pointed outand forecast the follow-up research.