Research On The Relation Between Ownership Concentration And Companies Operating Performance

This paper mainly focus on the relation between ownership concentration and operating performance within listed family businesses. Why choose family business? Firstly, family companies take a large proportion of private economy, while private economy is the most active part of china economy. Secondly, within the period of transition from traditional family firm to modern company, family companies in china are facing the lack of capital and management.To get rid of these difficulties, Family firms begin to raise found through capital market, recruit talented manager from the outside. While, these changes bring some new problems. How can family businesses handle these problems?This article give an description of Guomei Event, which reflects two problems:1)high ownership concentration in family firms give big shareholders motivation and capacity to rub profit from small shareholders;2)recruit talented manager from outside can improve company management and operating performs, while manage could do bad things to company owners and firms in his own behalf.So, how to face this dilemma? This article focuses on ownership concentration which is the most important aspect of ownership structure and chooses listed family companies in Shanghai and Shenzhen stock exchange between the year2008and2010as sample to investigate the relation between family holdings and firm performance.This article chooses the first shareholder’s percentage of stock, the sum of the top5shareholder’percentage, Z index and H index to measure ownership concentration. On company’s performance evaluation,this pape r choose Tobin’s Q and ROE. As to the control factors, though many studies had taken many factors into consideration, this article add family control factors into the model for the great influence that family control has in family company operating performance.By statistical description, we found that the current listed family firms showed a condition that ownership highly concentrated in the top5shareholders, relatively concentrated in the first shareholder. Analysis reveals that the relation between ownership concentration and listed family firm operating performance is nonlinear.Overall, our results are consistent with the hypothesis that the relation between ownership concentration and listed family firm is upside-down U. Furthermore, We note that industry influence is an important factor when investigate the influence that ownership concentration on family operating performance, so this paper choose three important industry samples to analysis, found that this upside-down relationship only exsits in manufactory industry.There most important contribution of this article is that take into industry factor into consideration, investigate the relation between ownership concentration and listed family firm performance within three different industries, and give a stronger evidence that industry has a great influence in research on the relation between ownership concentration and operating performance.