An Empirical Study Of Ownership Structure And Capital Expenditure Decisions

BACKGROUNDWith increasingly scarce resources, increasingly competitive market environment, the capital expenditures as a necessary way to maintain its survival and the development, occupies a more and more important position in the process of the development of the enterprise. Information technology industry as an emerging industry in the20th century, with its rapid situation of rapid development, now has become an important strength to promote the development of our society, has also been identified as the leading industry of economic development. Due to sophisticated, cutting-edge information technology as the core, the information technology industry has a more significant feature compared with other industries, often covering the latest science and technology, higher capital investment, high risk and high returns. New technology research, development and the formation process, need a lot of money, so, capital spending level of this industry is significantly higher than other industries overall.Ownership structure as the basis of corporate governance structure, different ownership structure cause different corporate power configuration. By influencing the company structure, the composition of the board of directors of the shareholders’ meeting, appointment and removal of internal managers, and other important decisions, equity structure affect the company’s financial decision-making behavior, ultimately affect the company’s financial performance. About effects of ownership structure in corporate governance and efficiency, from two perspectives of business performance and decision making, foreign scholars have done a wide range of research on the issue. On the basis of foreign research, the domestic scholars also have done related research on the subject, but more from the perspective of enterprise performance, research on ownership structure and corporate decision-making behavior also is less. Hu Guoliu etc.(2006), based on a sample of Chinese listed companies, has carried on the theoretical and empirical analysis on relationship between ownership structure and corporate capital spending decisions. However, his study did not consider the industry factors. Selecting information listed companies as the research object, this paper study the effect of ownership structure on corporate capital spending decisions.PURPOSEThere are three main purposes of this study, one is making a description of China’s information technology enterprise equity structure and capital expenditure level present situation characteristic through the data statistics analysis; Second, through empirical regression analysis, reveals affect the relationship between ownership structure and capital spending about this industry; Three is based on their correlation, optimizing enterprise equity structure so as to guide the investment decision-making of listed companies standardized and scientific.MAIN CONTENT AND VIEWThis article includes introduction, literature review, theoretical analysis, empirical research and policy Suggestions. Specific content consists of five chapters, the securitization research contents and research conclusions are as follows:Chapter1:introduction. Mainly expounds four questions:The first issue is the research background and significance of this article. The second one is this article research train of thought and structure arrangement. The third one is the method in this paper. The last one is the main contribution and deficiency. The main purpose of this chapter is to introduce background of thesis writing and the overall architecture for below.Chapter2:literature review. Mainly consisting of three parts, in the first part, the concept of equity structure and capital spending s, according to the research of this paper needs, ownership structure will be classified from the nature of control people and degree of equity concentration; capital expenditure concept will be form two aspects, broad sense and narrow sense. The second part and third part, the study of foreign scholars and domestic scholars will be summarized respectively, on the whole, because different scholars have different points of view, choosing different research objects, selecting different sample, the results are still uncertain. From theory to empirical analysis, foreign scholars’researches are deeply. Research on management equity and capital spending from perspective of equity nature is more. There are two views, interests converge and entrenchment effects. About the management equity and business capital spending decisions, is generally believed that the institutional investor shareholding can reduce the inefficient investment. About ownership concentration, the moderate concentration of ownership structure can improve investment efficiency, because of owners existing and to strengthen supervision over managers. From research methods of the point, domestic scholars formed the two mainstream methods, respectively based on the factors of equity and investment-cash flow sensitivity. From the research content, based on the research of foreign scholars, domestic scholars pay more attention to equity nature with considering national conditions, especially about the study on the relationship between the state-owned shares and investment spending, as well as the state holding effects on investment spending. However, many existing researches selecting the entire capital market as the object, the researches on a specific industry are few.Chapter3:this chapter is the theoretical analysis part, mainly made up of four parts. The first part is about the basic theory of the ownership structure and capital expenditure analysis, including the agency theory and asymmetric information theory. Analyze the agency problems between managers and owners and between shareholders, and asymmetric information led to the conflicts of different parts and different investment decisions. The second part is mechanism analysis of the impact of ownership structure on capital expenditure decision, combined with the situation of listed companies in China, analysis are from the nature of the equity ownership structure and ownership concentration two aspects. The third and forth parts are analyzing the present situation and problems of enterprise ownership structure and capital spending of information industry in our country. Shareholding structure has three features:total equity is growing, equity liquidity is enhanced and ownership concentration is decreasing. At present information technology enterprise, capital spending is steady rising, and the investment levels have bigger differences between individuals.Chapter4:the main part of this paper, the empirical study part, including the research hypothesis, variables definition, model building, the selection of sample data, descriptive statistics, correlation analysis and multiple regressions. At first, four variables of the equity structure and capital spending relationship respectively are analyzed in theory, based on this, put forward four hypotheses:Hypothesis1, under control of other conditions, state-controlled is negatively related to the level of capital spending(i.e., the state-owned holding listed companies’capital spending levels are lower than non-state-controlled listed companies);Hypothesis2, under control of other conditions, absolute ownership concentration is negatively related to the business capital spending levels. Hypothesis3, under control of other conditions, relative concentration of equity and capital spending have positively correlation; Hypothesis4, under the same situation in other conditions, equity balance degree has a positive correlation relationship with capital expenditure level. The second and third part, including variables definition and model building, this article selects variables as follow, capital expenditure, the final control people, equity concentration, equity balance degree, the company size, internal cash flow, the annual variable, growth, and then set up three multivariate regression models. The forth part gives details of sample selection and source, choosing according to certain standard from the2007-2011A-share listed companies in information technology industry; finally identify the460valid samples. The fifth section is description of statistics and correlation analysis, grouping statistics according to the nature of ultimate control person, ownership concentration and equity balance degree. The sixth section is the regression result analysis, empirically tested the impact of ownership structure on capital spending. Regression results show that the four hypotheses have been effectively validated. The second and third models are separately regressed according to the nature of ultimate controlling people, finding that correlation of grouped sample keep same with the overall sample, but significance is less than the overall sample.Chapter5:conclusion and suggestion part of this article, the first section is summaries and conclusion of the analysis of the mechanism in the third part and the analysis process and results in the fourth part. The first is that different ultimate controlling properties of enterprises, equity structure and capital spending are different through the descriptive statistics; The second is state-owned holding enterprises has significant negative correlation relationship with capital expenditure level; The third is absolute equity concentration will inhibit capital spending, while relatively appropriate concentration of ownership structure has a positive role in promoting capital expenditure, and this phenomenon is more pronounced in non-state-owned holding companies; The forth is in both the state-owned and non-state-owned holding companies, equity balance on capital expenditure has a positive role; The fifth one is for state-owned and non-state-owned enterprises, company’s scale has a significant impact on capital spending, while internal cash flow significantly influence on state-owned enterprises, and company growth influence more on non-state owned enterprises. The second part is from the angle of the shareholding system, putting forward policies and suggestions, including continuing to promote the reform of non-tradable shares, appropriate selling shares in state companies and introducing competition mechanism, correctly grasping the degree of equity concentration, rational utilization of the role of equity balance degree, increasing the correlation of executive compensation with performance of listed companies, etc. The last section is about the follow-up studies. It is necessary to combine equity structure with other governance factors to study relationship between ownership structure and capital spending in the future. And the future research on investment should notice more micro factors, such as the value of the project itself, investors’rational degree, the constraints of every party’s interests, that is to say, from the root to explore the influencing factors of investment behavior.CONTRIBUTIONS(1)Selecting information technology industry as the research object, research on the specific industry will improve the pertinence and accuracy. And selecting data from2007to2011which has a certain time span, the results have higher powers of persuasion.(2) This article selects the final control properties as an alternative variable to describe equity nature, rather than a general sense of the various kinds of nature of equity. In this sense, from the perspective of deep control, study on its relationship with capital spending has certain novelty.(3) In model2and model3, respectively about equity concentration and capital spending decisions, equity balance degree and capital spending decisions, group the samples according to the nature of ultimate control person, by contrast different influences on capital spending decisions under different control properties, the depth of the study will be improved.