The Research On Complexity Of Pyramid, Bargaining Game And Enterprise Value

With the continuous development and improvement of China’s market, China’s private enterprises have gradually become an integral part of China’s market. Existing studies show that China’s listed private enterprises generally adopt the pyramid structure. There are also widespread ultimate controlling person in private enterprises. Controller wants to achieve its ultimate separation of control rights and cash flow rights through this pyramid structure. Separation of ownership and control brought the agency problem between and minority shareholders, and ultimate control people encroach the interests of other shareholders, These acts undermine the value of the enterprise. However, the current study focused on two types of agency problems, arising from the separation of control rights and cash flow rights. That is to say, agency problem between shareholders and managers,as well as ultimate control human and minority shareholders. Most studies focus on the results brought by the separation of control rights and cash flow rights.This article starts from the most fundamental structure of private enterprises and shareholding of the pyramid structure, using panel data of China’s private listed companies, this article tests the presence of the pyramid structure and the ultimate controlling person. From these perspective, to study the impact on the separation of control rights and cash flow rights. This article provides the basis and methods to enhance the value of private listed companies and promote the healthy development of China’s private enterprises.Firstly, This article defines the concepts of the pyramid structure, the ultimate controlling shareholder,the separation of control rights and cash flow rights, private benefits of control, bargaining game. Then discusses the theory and its literature review involved, and based on current research and analysis put forward the hypotheses, and adopt the most value problems in linear programming constraints of linear objective function to analyze, using the2004panel data of Chinese private listed companies of2009-2012to do empirical research the Draw the following Conclusions:(1) There is general pyramid structure and the ultimate controller in our private enterprise. And ultimate controller wants to increase the complexity of the pyramid structure by increasing the number of levels on the horizontal and the number of chain and on the vertical, making that the ultimate controller’s actual master control is far beyond its own cash flow rights. Thus,they are able to exert significant influence on corporate governance. And the number of levels and the increase of the control chain will lead to the doubled complexity of the pyramid structure, so Ultimate controller can gain greater control with less cash flow rights, such an action would exacerbate the two right divisions.(2) Supervision of minority shareholders can suppress the behavior of ultimate controller. Therefore, the ability of minority shareholders bargaining game with the ultimate controlller to some extent can suppress the ability to obtain greater control with less cash flow rights. That game can reduce the separation of control rights and cash flow rights.(3) The larger of Control rights and cash flow rights, The greater the likelihood of the ultimate controller use less cash flow rights to acquire more control through a complex pyramid structure.They can reduce the cost of private benefits through a complex pyramid structure. So it is easy to "hollowed out" the enterprises, reducing the value of the business.