A Study On The Relationship Between Ownership Structure And Actual Control Of Internet Companies

The 21 st Century is an information age. The Internet has greatly changed our lifestyle. China’s Internet industry is prospering supported by national policy. Therefore,abundant venture capital has arisen from the prosperity of the Internet Industry. During the venture investment, it is common that original strong stockholders gradually turn into minority stockholders while some of the founders still take control over the company after that. How the founders control the company with minority stocks, why VCs as dominant shareholders trust the founders with actual control, and how the relationship between them would affect the company is concluded as a problem of the relationship between ownership structure and actual control, which is closely related to the development and destiny of a company.This paper analyses the relationship between ownership structure and actual control of Internet enterprises based on the case study method. With thorough literature review, this paper firstly introduces the Internet industry, analyzes the relationship between ownership structure and actual control and how Internet companies operate efficiently with institutional investment. Secondly, it describes the core concept of Partnership and how it affects Internet companies directly. Then, it elaborates on the case of Alibaba where Partnership has become the resolution to the conflict between ownership structure and actual control. At last, the paper measures the performance of Alibaba in different ways to tell whether the corporate governance has improved with contradiction resolved. The research has found that in some way, Partnership can help resolve the conflict between ownership and actual control of Internet companies, and also coordinate the original administrators and venture capital institutes, so that the responsibilities are clarified, the original administrators are motivated, and the supervision of VCs is strengthened which consequently improve the company performance. This paper enriches the contents of corporate governance which is meaningful to the development of China’s Internet companies and the Internet industry.