An Empirical Study On Influencing Factors Of Control Premium In China’s Listed Companies

In recent years, with the continuous development of the capital market, China’s equity transfer market is gradually improving. In the process of company equity trading, the transfer of control power is a universal phenomenon. Since the1990s, with the gradual deepening of theoretical research on company governance and the breakthrough of classical equity homogeneity assumption that the company’s shareholders should obtain the corresponding earnings in proportion to their shares, in a company with relatively concentrated ownership structure, the company’s major shareholders and minority shareholders conflicts of interest between has been becoming one of the core issues in the field of corporate governance. Also, control premium phenomenon has started to become the focus of attention. To measure the level of control premium as well as to clarify its factors and producing mechanisms could not only provide a scientific basis for the study of the pricing issues of different transfer equity power, but can also provide effective measures to control unreasonable premium in order to better protect the interests of the small and medium shareholders.Based on the relative theory and literature review, this paper take the annual transfer price of the shares of listed companies from2006to2013as a sample. By using the difference between pairs trading method, we calculate the corpotate control premium at the average rate of34%.In terms of influencing factors, this paper processes the empirical analysis respectively from three levels ranging from the financial characteristics, credit structure and governance structure features, and obtains the following conclusions:(1) On the terms of financial characteristics, this paper has found that the target company’s capital intensive, cash proportion, return on the total assets are significantly positively related to control premium levels. However, equity agency costs and control premium levels were significantly negatively correlated. Meanwhile, company size has negative correlation with the control premium, but the regression results are not significant. Financial leverage and control premium has positive correlation, but the regression results are not significant.(2)On the terms of credit structure features, the studies have found that long-term debt ratio and commercial credit debt were significantly negatively correlated with the control premium levels. Short-term debt ratio of the target company as well as the bank liabilities have negative correlations with the control premium levels. However, the regression results were not significant.(3)On the terms of governance structure features, this paper has found that the target company’s ownership concentration were significantly negatively correlated with control premium levels. The equity restriction and control premium levels were significantly positively correlated. And the internal control quality evaluation terms has significantly negative correlation with control premium, while the size of the board of directors, the proportion of independent directors, auditing firm size, type of audit opinion are not related to the level of a control premium.Finally, based on the above analysis, this paper put forward some policy recommendations such as to strengthen supervision and improve creditor monitoring efforts as well as to improve company governance.