External Governance Environment,Control Rights Characteristics And Firm Value

The capital market of China has dual characteristics of emerging and transition, also the background of split-share reform, with the rapid development in the past twenty-four years, ultimate control problem has caused a lot of "The Second Agency Problem" between the final control people and the minority shareholders, also real cases in the markets. Meanwhile, the thought of "Law and Finance" put forward the external governance environment may help alleviate or weaken the role of internal governance problem. Recently A few domestic scholars begin to pay close attention to the corporate governance influence made by the external environment differences. But they focus on the direct influence rather than the indirect influence caused by the interaction between the external environment factors and internal governance factors, and how the interaction alleviates the negative effect of internal management. Therefore it has a high significance and innovation to focus on the interaction effect of external governance environment and control characteristics in a research framework with a double perspective.After reviewing the existing research achievement, based on the ultimate property right theory, this paper puts the external governance factors of listed company into the research framework, then, carries out theoretical analysis and corresponding research hypothesis. We select a balance panel data of1133listed companies between year2005-2012, using a fixed effect model to investigate the relationship of control characteristics and the firm value, then, pay more attention to the interaction effect of external governance environment with the separation of two rights or the property of final controller. To ensure the reliability of research, we makes robustness test in the end. This paper finds that cash flow rights ratio is negatively related to the firm value, it is different from the conclusions of foreign scholars. It may be related to the "Predatory Dividend" behavior of ultimate controller. Control right ratio is also negatively related to the firm value. Then the separation of two rights has a negative effect on company value, which means asymmetric arrangement of right has caused loss of firm value. Furthermore, considering the property of final controller, research finds that the negative effect between the separation of two rights and firm value is remarkably significant when final controller is non-state. On the contrary, it presents a significant positive promotion effect when the final controller is state-owned. Based on the previous statement, we add the external governance environment into the analysis, find the marketization process and the legal institutions level have a positively promoting effect on the company value. The interaction test of controller property and external environment illustrates that the positive effect is more effective in the non-state-owned enterprises rather than the state-owned enterprises. Using cross test and group regressions, the conclusion is the marketization process and the legal institutions level can effectively alleviate the negative effect between the separation of two rights and firm value. That is to say, the external governance can indirectly reduce the contradiction of internal governance. On the other hand, the effect of government intervention degree is not clear and also not significant, it probably relates to the complicated market-government relationship of our country. At the end of this paper, we summarize the empirical research conclusion, then put forward policy suggestions from both the external governance and internal governance about how optimize corporate governance.