The Listed Company Ultimate Controller’s Separation Of Two Rights To Institutional Investors’Share Holdings Impact Study

With the continued reform of China’s market economic system, the capital marketcontinues to grow and develop, which is the inevitable outcome and inherent requirementsof economic development.However, there are still lots of problems need to be solved,especially the highly concentrated ownership structure of listed companies. Althoughownership concentration urges controlling stockholders to pay high attention to companies’financial and management performance, which largely avoid internal control problem, theproblemof large shareholders’ tunneling behavior is serious.Meanwhile, with the continuous development of capital market, institutional investorsgradually become a new force in china’s capital market, the interest conflicts of bigshareholder and outside minority shareholders change to the one between big s hareholderand institutional investors. Due to the overall shareholding ratio of institutional investorremains low level, and there still exists regulatory limits for the proportion of shareholding.Therefore, the nature of institutional investor at this stage remains similar with the externalminority shareholders, and mainly serves as a negative corporate governor. Hence, someinternal index of listed company still the significant elements for shareholding decision ofinstitutional investorIn the situation of ownership concentration,the finally controller of listed companyused to use the leveraged tools such as pyramid equity structure or cross-shareholdingmodel shape the excess control,and then chasing the private benefit ofcontrol(PBC).Besides, the greater divergence between ownership and control, the smallercost ultimate controlling shareholder should pay, and the more strong motivation oftunneling behavior, which will greatly harm the interests of minority stockholder andpromote the formation of conflict among shareholders.In this paper, the author select separation of two rights which highly impact bigshareholders’ tunneling behaviors as the key indicator ofcompanies’ internal governance tostudy what exactly effects of it to institutional investors’ holdings preference.Throughtheoretical analysis, the author propose the key assumption that the bigger degree ofultimate controlling shareholder’s two rights divergence,the lower the proportion ofinstitutional investors’ holdings, and is proved byempiricalanalysis.Finally, this article put forward several suggestions as follows. Firstly, improvingownership structure of listed companies to suppress big shareholder’s tunneling behaviorsgradually. Secondly, regulatory section shall be give institutional investors continuing support to promote their size and power and trigger their positivity for companygovernance.In general, this article adopts the method that combines theoretical with empiricalmethod. Additionally, there are several innovations in paper, such as it’s from theshareholding structure perspective to illustrate the whole paper’s theory and the methodselecting data, which avoiding the mismatch of data, is different from other documents.