Research On Corporate Performance Of Listed Companies And Ownership Structure In China

The relationship between ownership structure and corporate performance has always been the focus of scholars of this field, however, till now there hasn’t gotten an agreed conclusion. Studies about Chinese companies are also different. In particular, equity division in China has resulted in "same equity with different right" among shareholders of listed companies in mainland stock market, leading to serious injustice between the two types of shareholders. This also has become great limitation and obstacle in this field. Based on the negative influence, from2005, Chinese market started the reform of non-tradable shares, in order to resolve the problem above, so as to promote the sound development of Chinese market.Till now, the reform of non-tradable shares has mainly completed, giving previous studies are almost under the background of equity division, this paper aims at studying if there are some new development or changes between shareholding structure and performance when the reform is almost over. This paper attempts to verify the influence of tradable share ratio on performance, the use of equity balance in Chinese listed companies, state-owned shareholders’efficiency in capital utilization and corporate governance, as well as the importance of growth in future research.This study in accordance with the following ideas:separation of ownership leads to the principal-agent problem, with the information asymmetry and equity attributes taking into account, selecting multiple performance indicators from the perspective of financial and market to analyze the impact of shareholding structure on corporate performance. Methods used to analyze this problem contain discussing the mechanism about how shareholding structure impact performance in theory, and from an empirical point of view, to further analyze the relationship between the two.This paper consists of five parts, content and structure of each chapter is organized as follows: Chapter one, introduction. This chapter introduces the main purpose of this study and research background, definition involved, research methods, the structure arrangement, possible innovation and deficiencies.Chapter two, literature review. This section reviews the research status of the shareholding structure and corporate performance at home and abroad, mainly from the views of ownership concentration, proportion of insider ownership, equity characteristic and endogeneity. This section attempts to identify possible areas for improvement as well as outstanding issues at the base of reviewing current studies, as the innovation of this study.Chapter three, the theoretical analysis of the influence on corporate performance from shareholding structure. This section briefly reviews the theory of separation of ownership, the principal-agent theory and asymmetric information theory which affect the relationship of shareholding structure and company’s performance, then from the two angles of the principal-agent theory and asymmetric information theory to explore the mechanism of how ownership structure impacting corporate performance, as well as the possible relationship between the two. Specifically, from the perspective of principal-agent theory, when the listed companies as research object types are widely dispersed in ownership concentration, agency conflicts are mainly between the shareholders and management, at this point, the correlation between the two is positive. While the equity distribution is relatively concentrated or absolutely concentrated, agency conflicts are mainly between the controlling shareholders and minority shareholders, thus the correlation is negative. Analysis from the aspect of the asymmetric information theory, shareholders can be divided into internal and external shareholders, thus we must take the "incentive alignment" as well as "management" into account when study the relationship between internal holding ratio and performance. These two effects may induce composite effects, which also increase the complexity of the research questions.Chapter four, the study design. This section firstly put forward hypothesis about the form of the relationship between ownership structure variables and the corporate performance indicators, followed by setting conditions on the sample data selection, a total of653listed companies in the2008-2010three-year data. Unlike most previous studies which only consider a single performance indicator, this paper examine performance from multiple perspectives in order to avoid the limitation that may exist when only from a single performance indicator. Indicators contain return on equity, return on assets, Tobin’s Q ratio, and the ratio of capital maintenance and increment. Among them, taking the ratio of capital maintenance and increment into account is because of the specificity of China’s market, to investigate whether there is some significant relationship with the ultimate control of state-owned listed companies. This paper considers ownership structure indicators in the proportion of tradable shares, the ownership concentration, equity property and equity balance these four areas. The empirical part is divided into two phases, first is single-variable regression, to measure the extent of the control variables on the model explanatory power. The second stage is multiple regression analysis, including the three-year regression of the total sample, sub-annual regression, lag a return and robustness test, and establish model to check the existence of non-linear relationship between the largest proportion of shareholding and performance in the end. Results show that, with the reform, tradable shares to total equity ratio has been greatly improved, however, the largest shareholding ratio has not changed greatly, empirical evidence shows that correlation between the ratio of the outstanding shares and company performance is negative, which shows that we must consider the affordability of the market when actively promoting the reform. However, correlation turns to positive in lag a regression, indicating that we must face up to the reform in long-term observation to see its positive significance. The largest shareholder put certain adverse effects on corporate performance, while equity balance plays a positive role. The role of legal person shareholders has not yet been valued and play, the link between public shareholders and company performance is not significant. A certain degree of inefficiency of state-owned shareholders to participate in management, and has weak positive relationship with the ratio of capital maintenance and increment. Lastly, there is not a non-linear relationship between ownership concentration and corporate performance, and the endogeneity in the sample is not obvious.Chapter five, conclusions and recommendations. This chapter begins by summarizing the overall conclusion of this paper:the increased proportion of shares in circulation is the obvious result of the reform, but these did not bring to obvious performance’s significant improvement in the market. When judging the effectiveness of the reform, we must consider it from the view of company’s growth. Though there is a obvious result of equity balance, it still needs to be pay more attention to. State shareholders in corporate governance perform a certain degree of inefficiency, while the correlation of public shareholders is not obvious, and the role of legal person shareholders needs to be strengthened. Capital maintenance and increment ratio, as one of the performance indicators of this article, is weaker than return on assets and Tobin’s Q value in the empirical analysis in significance. The reason may partly because of the representativeness of the variable itself is weak, and partly because while the net profit is high but the remains within company to expand or to further the development of the company are not high. Secondly, on the basis of summing up countermeasures to solve these problems above:the reform needs to pay attention to the characteristics of the industry and the market will bear, develop institutional investors in corporate governance to promote the diversification of ownership structure, enhance the basic ability of minority shareholders to participate in the securities market by education, strengthen internal checks and balances and oversight mechanisms, strengthen external supervision to promote the sound development of the market. Finally, future research directions suggested. Particularly, as the indicator to measure the company’s growth, this paper added intangible assets in the form of intangible assets to total assets ratio which is a control variable in the model, the empirical results show that it has certain significant and it has enhanced year by year. As one of the sources of the core competitiveness for enterprises, intangible assets on behalf of the company’s future growth, under the background of tangible resources fierce competition, companies must pay attention to the role of intangible assets to further develop. Thus, we believe that in the future study in this field, the possible impact of intangible assets must be taken into account.Innovations of this paper are mainly as the follows:1. Giving the specific historical background of China’s securities market, this paper adds Capital maintenance and increment ratio to study the relationship between ownership structure and corporate performance.2. Excepting the size of the company and the company’s industry, region, etc., corporate performance will also be affected by the impact of the company’s growth, therefore, in the model this paper adds a measure of corporate growth control variable-the proportion of intangible assets to total assets.3. Empirical analysis of this paper is under the background that the reform of non-tradable shares is almost completed, which is different from previous studies, the empirical analysis in the context of the share reform may have some new discovery.However, data selected only the ones meet specific requirements, and the variables can not fully cover the factors that affect the relationship of equity structure and performance, which leading some disadvantages in empirical analysis.