Can Split-share Structure Reform Effectively Restrain The Private Benefits Of Control?

Split-share structure is the major institutional arrangement in Chinese capital market. But with the rise of China’s market economy, split-share structure is not for the development of capital markets. The concentration of ownership brings about a problem in corporate governance: Private benefits of control.Private benefits of control are key issues in the field of corporate governance. Our listed companies’ private benefits of control are different from other countries in Chinese particular institutional context. It is especially noticeable in the excessive concentration of ownership of China. Split-share structure reform is to solve this problem primarily. Scholars mainly pay more attention on the factors of private benefits of control, but ignoring our special institutional background, split-share structure reform.Using the data of Shanghai and Shenzhen listed companies whose shares have changed from 2001 to2014 as sample, this paper tries to answer whether Split-Share Structure Reform can effectively restrain the private benefits based on the perspective of internal governance, product market competition and the operating environment. On this basis, the paper further studies the economic consequences of the private benefits of control. Based on internal governance approach, inhibitory effect between split-share structure reform and private benefits of control is different under the different internal governance. The better internal governance is, the more obvious the effect of inhibition is. Based on product market competition approach, inhibitory effect between split-share structure reform and private benefits of control is different under the different product market competition. Because of structural imbalances in the industry, the more intense product market competition, the more obvious the effect of inhibition. Based on the governance environment approach, inhibitory effect between split-share structure reform and private benefits of control is different under the different governance environment. The better governance environment is, the more obvious the effect of inhibition is. In the further study, we find that the presence of private benefits of control would undermine corporate performance.Based on these findings, we draw the following revelation; Split-share structure reform which has policy significance affects Chinese society at all levels. It improves the efficiency of corporate governance at the micro level, promotes product market competition mechanisms and improves the efficiency of capital markets at the macro level. This paper argues that we should take full account of macroeconomic policy,institutional background, industry product market competition and the external market environment governance.