The Divergence Between Cash Flow Rights And Control Rights、 Institutional Investor’s Shareholding And R&D Decisions

R&D investments are strategic decisions affecting the survival and development of high-tech enterprises. What is the inherent link between the style of radical or conservative of R&D and corporate governance factors? The traditional corporate governance theory which is based on the assumption of dispersed ownership, mainly focused on the principal-agent relationship between owners and operators, discussed the R&D decisions from the perspective of the board regulatory or managers incentives. However, there are a large number of Chinese listed companies which exist "dominance" phenomenon in reality, and the ultimate controller, by building complex chains, achieved dominating greater control rights with smaller cash flow rights. The deviation of the cash flow rights and control rights could made that the ultimate controller can make R&D decisions according to their own will and benefits, and ignoring the benefits of small shareholders. What effects does the principal-agent relationship between the ultimate controller and small shareholders exactly make to the R&D decisions? Institutional investors were seen as external core mechanism to alleviate the agency problem between ultimate controller and small shareholders by some scholars. However, under the Chinese institutional background, the emerge of institutional investors is a relatively short time, different types of institutional investors may differ in the willingness and ability of participating in the corporate governance, whether can they really play the role of effective supervisor? These two issues both need meticulous theoretical analysis and empirical test.In this paper, on the basis of the ownership structure theory, the principal-agent theory and the ultimate control right theory, after finishing the theoretical analysis and empirical test based on data of GEM private listed corporations, we find that:(1) the lower of cash flow rights of ultimate controller, the higher degree of deviation of the cash flow rights and control rights, the higher the level of R&D investment in the listing corporations. This means the ultimate controller tend to ignore the benefits of small shareholders, and more aggressively spend money of small shareholders on R&D investments; (2) In general, the institutional investors can not significantly relieve the agency problem between ultimate controller and small shareholders. Furthermore, venture capital organizations (VC) also does not play an effective role as supervisors, and can not significantly alleviate the agency problems between ultimate controller and small shareholders; security investment funds take an attitude of acquiescent or collusion, which exacerbate agency problems between ultimate controller and minority shareholders.