Ultimate Control And The Choice Of Financing Structure In China Private Listed Companies

In the traditional corporate governance, the main concern is the agency problem between the management and the shareholders, but the recent studies have shown that, the enterprise exists in the controlling shareholder. The controlling shareholders exist in remission between managers and shareholders of the agency problem at the same time, and the existence of controlling shareholders expropriate minority shareholders interests phenomenon, which leads to the agency problems between the controlling shareholders and small shareholders. A large number of studies show that there are ultimate controlling shareholders in the most of the listed companies, and the ultimate controlling shareholders profoundly affects the company’s financial decision behavior. Based on control rights in Chinese private listed companies, the analysis found that,in private listed companies in China, Pyramid equity structure is always used to strengthen the control by the ultimate controlling shareholders. In this structure, the ultimate controlling shareholders by the separation of the two powers through the influence of corporate financial decisions by listed companies and the small shareholders’ right and interests, thus exacerbating the agency conflict between the ultimate controlling shareholders and small shareholders.This paper is divided into five parts, the first part is the introduction, introduced the research background of this article; the second part is the theory summary, mainly introduced the basis theory of the research; the third part and the fourth part is the empirical study, we sampled206private listed companies from2008to2010a total of618sample data as the research object and makes an empirical analysis between the ultimate control rights and financing structure. The fifth part is the limitation of the paper. The study found that:(i) There are often exists a plurality of control chain layer between private listed companies in China and its ultimate controlling shareholders, we call this structure the Pyramid Structure;(2)In Chinese private listed companies, the ultimate controlling shareholders of ultimate control rights in more than20%of the proportion accounted for more than70%, led directly to the control rights and cash flow rights separation of the two powers.(3)In Chinese private listed companies, the ultimate control right and ultimate cash flow rights is closely related to listed companies’ financing decision, and the influence is remarkable; namely the ultimate controlling shareholder in financing decision-making, is more concerned about the liabilities bankruptcy effect and free cash flow effect.