Ultimate Controllers’ Characteristics And Performance Of Ompanies Listed On GEM

GEM listed companies has shown its huge economic potential with the number of companies growing from28in2009to345in2012. In the study of factors affecting the performance of companies listed on GEM, many foreign scholars focus on the nature of the investors (most on venture capital). From the research on ultimate controllers’ characteristics, this study purposes to examine the effects on reducing agency costs and improving GEM listed companies’ performance by comparing two important types of investors-Government and VCs. There are three aspects of research conclusion.First, companies listed on GEM, whose ultimate controllers are the Government have significantly higher performance than non-Government. This result indicates that enabling role of the Government of listed companies is bigger than usurping. As the running system builders and capital investors,Government has promoted the development of listed companies. In addition, during the companies whose ultimate controllers are the Government, those controlling by state-owned asset management institutions is lower than controlling by the state-owned Industrial companies.Compared with state-owned asset management institutions, the state-owned Industrial companies have more professional management experience and less administrative intervention. Second, companies listed on GEM, whose ultimate controllers are the VCs have significantly higher performance than non-VCs.Incentives and constraints provisions setting by the venture capital contracts between venture capital firms and start-ups reduce the agency costs, and start-ups’ not trying behavior is constrained. Venture capitalist entrepreneurial experience and injection of venture capital also contribute to the development of listed companies. Third, Absolute control power can improve the largest shareholder’s private benefits and make their objectives tend to corporate goals. In addition, the results of the agency problems caused by the separation of ownership are not significant. In response to these results, we propose the corresponding recommendations.