Actual Controller 's Ownership Structure And Corporate Performance

This paper focuses on investigating the effect of actual controller’s ownership on corporate performance. The research is based on296private listed companies from Shanghai and Shenzhen Stock Exchange during the period of year2006-2011. Meanwhile, this paper studies the relationship of actual controllers’control right, the separation of ownership and control right, corporate asset size with corporate performance.In recent years, China’s private companies have been developing at a strong and fast pace and have occupied a significant position in the country’s economy. Private listed companies are now playing as much importance as state-owned listed companies. Therefore, the researches on the corporate governance of private listed companies are not only essential to companies’own development, but also to the overall economy.This paper first reviews and summarizes the research findings regarding the relationship between ownership structure and corporate performance as well as the endogeneity of ownership structure made by scholars at home and abroad. After testing and verifying the assumption of endogeneity of actual controllers’ ownership structure, I analyze the relationship between actual controllers’ ownership and corporate performance using generalized two stage least square (G2SLS). I find out that actual controllers’ownership is positively related with corporates’Tobin Q, but the relationship between ownership and ROA is reflected as an inverted U curve. Later, I further examine the effects of actual controller’s control right, the separation of ownership and control right, corporate asset size on corporate performance. The results suggest that, first, actual controller’control right is positively related with both Tobin Q and ROA. Second, the relationship between the separation of ownership and control right and corporate performance is a negative correlation; however, the regression result is not significant. Third, the larger asset size a company has, the lower is its Tobin Q while the higher is its ROA.