The Separation Of Ultimate Control Right And Cash Flow Right And Its Effect On Family Firm Value

The first generation of agent problem focused on agent cost brought by conflicts between equity and debt in diffuse ownership, while the second generation of agent problem pay more attention on the agent cost caused by separation between cash flow right and control right. Since La Porta, scholars began to make research on this separation and interest conflicts between large and small shareholders make by this separation. In China where private economy is becoming more and more important in capital market, scholars at home and abroad start to make research on this concentrated ownership structure and agent cost with it.In this paper, firms are selected from family listed firms in Shanghai Exchange and Shenzhen Exchange. Listed family firms are divided into direct-listed firms and undirected-listed ones. Referred to researches made by other famous scholars, I compared the differences of ultimate control rights, cash flow rights and right separations in firms with two listed types. After this, I made researches on what effect this difference could make on company value. There are four main conclusions:1. in family firms, the separation level in direct listed companies is lower than that in indirect listed ones.2. Whatever listed way, the separation could have a negative effect on company value, and companies with different listed way may be influenced in different degrees.3. Tobin Q is a better indicate than ROE to measure firm value accurately.4. There is a significantly positive correlation of independent director system and company value, so this system is an effective way to ensure the fairness of company operation strategy.Conclusions in this paper may help financial regulators to make supervision on listed companies, especially on the indirect listed company’s earnings management. Besides, investors should be guided to enhance protecting consciousness.