An Empirical Study On The Impact Of Non-tradable Share Reform On Ownership Structure And Agency Costs

The relationship of ownership structure and agency costs has been the focus ofcorporate governance research. The equity agency costs can be divided into twocategories: one is the agency costs between shareholders and managers; the other isthe agency costs between large and small shareholders. In China, the cases emerge inan endless stream. Before the non-tradable share reform, high ownershipconcentration and equity division existing make it easy for them to grab the interestsof small shareholders. At the same time, the situations of the state-owned shares"alone big" and lacking the actual owners, make it convenient for the managers tomisappropriate company resources. After the reform, the shares’ liquidity of listingcorporation has been improved, ownership concentration has been decreased, andinterests balance mechanism has been gradually perfected. Basing on the changesbrought by the non-tradable share reform, this paper tries to analyze the impact ofnon-tradable share reform on ownership structure and the influencing path on equityagency costs in depth.the paper theoretically analyzes the influence of the non-tradable share reform onthe agency costs theory and changes of relationship between ownership structure andagency costs, and use the data from2004-2011years in manufacturing listingcorporation, to make an empirical test to comparing the relationships betweenownership structure and agency costs before and after the reform. The empiricalresults show the non-tradable share reform have significant effects on ownershipstructure and the agency costs; after the reform, the two equity agency costs aresignificantly reduced; the relations between ownership concentration, the proportionof institutional investors holding shares and two equity agency costs are optimized.While in non-state-owned company, equity restriction has not been entered the scopeof company management; state-owned property and equity decentralization are thecause of positive relation between equity restriction and agency costs. According tothe empirical results, some suggestions are presented to consolidate system reform:gradually consolidating the achievement of the non-tradable share reform, improvingthe proportion of institutional investors, moderately reducing the share ofstate-owned and establishing balancing ownership structure.