An Empirical Study On The Impacts Of Ultimate Ownership Structure On Corporate Value In Family-controlled Listed Companies After Non-tradable Share Reform

Since La Porta et.al(1999) traced the chain of owner to distinguish the ultimate controller, more and more researchers applied this methodology to study the ultimate ownership structure in different areas of the world.But China is not covered by international empirical samples,,not to mention the particular group-family-controlled companies. The reason is the unique ownership structure of Chinese companies and the particular institutional environment. With the completion of the non-tradable shares reform, it will have a far-reaching effect on the ownership structure. Thinking of the eye-reaching performance of the family-controlled listed companies in the stock market and the frequent "tunneling" by the family controlling shareholders,we wonder after the non-tradable share reform, how the ultimate ownership structure will effect the corporate value of the family-controlled listed companies? Is there really some changes brought from the reform? All this paper to do is to answer these above-mentioned questions.Based on the existed research and classical theories, we mainly use principal-agent theory to explain the two kinds of principal-agent problem existed in the family-controlled listed companies, that between managers and family controlling shareholder, that between controlling shareholders and minority shareholders, respectively. Using the sample of173family-controlled listed firms that have completed the non-tradable reform before2007,we investigate the features and changes of the following variables:cash flow rights(CR),control rights(VR).the separation of the cash flow right and control right(Sep). We applied theoretical analysis, statistical analysis along with quantitative analysis to this paper and draw the following conclusions:1、Through statistical analysis, we find that both the average VR and average Sep have declined through the period of2007-2010.But the average VR is31.8% in the samples,family’s controlling place didn’t change;the average Sep is1.919, Which means the separation of the cash flow right and the controlling right is widespread in the family-controlled listed companies, but the rate of family-controlled listed companies with high Sep was reduced.2、Through testing the effect of the cash flow right and the control right on the corporate value,both the cash flow right and control right could raise corporate value. The incentive effect of the cash flow right is constant with other researchers.however,contrary to the occupation effect of control right in some references,the control right also demonstrate incentive effect after the non-tradable share reform.3、The separation of the cash flow right and control right is common in most companies, especially in the family-controlled companies.As mentioned above, the cash flow right and the control right could restrain the family controller to occupy the interest of the whole company. However,in the case of separation, the family controller could control the whole company with far less cost.Facing huge private benefits from control, the family controller could still implement the occupation and do damage to the corporate value. However, the damaging effect is weak, and the coefficient of Sep and corporate value is only-0.005.4、The supervising effect of the tradable shareholders were not demonstrated completely.The coefficient of proportion of tradable share and corporate value is positive,but not significant. One reason is that the era of complete circulation is not coming yet, the stock price could not have a great influence on the family controlling shareholders;the other is that the investors in the our stock market have been opportunists for a long time and the non-tradable reform could not change their "free riding " in the corporate governance in a short time.5、The institutional investors could raise corporate value significantly.Most of the institutional investors insist on value investment, caring the long-term performance of the companies.Moreover, they have strong capital strength and are highly-professional. That means the institutional investors have the motivation and ability to supervise the family controlling shareholder and take active part in the corporate governance.