Ownership Characteristics And Large Shareholder’s Propping

The study of corporate governance once focused on the problem of principle-agent between the management and outside shareholders. In recent years, however, given the prevalence of centralized proprietorship and control, large shareholders’ irrational actions of expropriating the company resources at the cost of minority stockholders start to attract more attention. On the basis of common existence of large shareholder’s control, this thesis takes the shareholders’ motivation of related M&As and the lack of law and supervision as breakthrough point, and the M&A events with propping motivation as object of this study. It analyzes the influence of equity characteristics factors on propping, based upon the research of existence of propping (measured by fluctuation of corporate performance). It aims to clear the following questions as:Do they resort to related M&As so as to prop up companies suffering losses? Whether the equity characteristics would influence large shareholders’ propping or not?In empirical part, the author explores the existence of large shareholders’ propping over related M&As and the degree of propping depended on ownership characteristics through grouping analysis, non-parametric test and multiple regression analysis. It comes to the following conclusions:the financial performance for companies of the experimental group has been more significantly increased than that of the control group through related M&As, and the related M&As undergone by companies performing poor is indeed a means of propping; however, from the market reaction of the listed companies, there is not a significant difference between the two groups suggesting that the propping actually can not better the long-term market performance. In addition, equity characteristics impact on propping through effects as bellow:(Ⅰ) there is a reversed "U" relation between the concentration ratio of equity and the degree of large shareholder’s propping, and (Ⅱ) the balance ratio of equity is negatively related to the degree of propping, and (Ⅲ) there is a higher possibility of propping when the company is non-state-owned than state-owned.The theoretical significance of this research is that it introduces large shareholders’propping based upon the ownership theory and the control theory and explores the impact of special ownership characteristics on propping. The practical significance of this study is that, to a certain extent, it helps to improve the governance structure of listed company and regulate propping behavior, so as to improve investor’s confidence, promote the normal operation of listed companies and promise a healthy development of the security markets. The improvement and innovation of this research is mainly reflected in:taking the Chinese market data as evidence to explore the behavior of large shareholder’s propping up the listed companies, and on the basis of testing the existence of propping, we further discussed the concentration ratio of equity, the balance ratio of equity and the nature of equity of the listed companies and explore their influence to the behavior of propping. In addition, the research is slightly different from foreign research models with respect to model setting, variable selecting and time spanning.Combined with China’s reality, in order to optimize the governance of listed companies in China, the following suggestions has been proposed on the basis of the conclusions:(Ⅰ)further strengthen the supervision of large shareholders’ behavior, especially the connected transactions, and make the exercise of minority shareholders’ rights more convenient, and (Ⅱ) improve and perfect the ownership structure through establishing a modest equity balance and training diversified investors, and (Ⅲ) improve the market environment and promote the construction of the legal system.