The Research On The Effect Of Cross-Shareholding To Corporate Governance Performance Of Listed Companies

In1999, Gf Securities Co., Ltd. and Liaoning Chengda Co., Ltd. became each others’ second largest cross shareholder. This is the first cross shareholding case in China security markets and it has been more and more popular and frequent in the economic area since then. By the time of Jun2011, there are517companies conducted cross shareholding in Shanghai and Shenzhen Security markets, which is22.07%of the total listed companies. According to the recent years’ data, the numbers is still climbing and it is related to all the industries and areas. It is very common for the listed companies to cross shareholding with below benefits:Stabilize the business control;Reduce the financing cost;diversify the operational risk;promote the management efficiency. While on the other sides, negative impact will happen without proper supervision, such as increment of internal cost, watered capital and inflation of security markets. The management problems triggered by cross shareholding is becoming more and more complex and diversified nowadays. Based on the practice in China, it is important to conduct a research among the listed companies on the impact from cross shareholding to company management. It will be meaningful for promoting the health development of listed companies and the security markets.This dissertation consists five sections. The first section is an introduction of the academic background and purpose, as well as methodology applied in this dissertation. The second section is a summary of relevant theories and definition of key concepts. It aims at providing definition, types and motivation analysis of the cross-holding theory based on the elaboration of Principal-agent Theory; agent costs theory and synergy theory. The third section is a general analysis of the influence of cross-holding on the management and organizational efficiency of the companies involved. It also includes a descriptive statistic analysis of the Chinese listed companies boasts cross-holding, aiming at summarizing general features of companies of this type. The fourth section is a positive analysis. With sample size and key variance adopted, SPSS is utilized to test the four logistic regression models established. Key implication of the positive anaylsis include:there is a positive relativity between the factor of cross-holding and the operation performance of a listed company. Firstly, higher cross-holding rate implicates better managements performance. Secondly, higher cross-holding rate helps leveling down the market risk of listed company. Thirdly, cross-holding rate is not likely to be relevant with the internal control of listed company. The fifth section is a conclusion of the previous sections and suggestion for possible actions and further studies.This dissertation provides different angels, namely from agent issue, internal monitoring mechanism and risk control, in the observation of the influence of cross-holding to the management and operation performance of listed companies. By establishing regression models and further elaborate the result of the test of those models, this dissertation is able to achieve meaningful conclusions and provide possible solutions for better management and performance of listed companies.