Research On The Equity Balances And Its Influence On The Corporate Performance

Unlike American and European countries', the phenomenon of large shareholder control or dominance in the company is prevalent in China. During the period of economic transformation in China, listed companies which led by government were mostly restructured by state-owned ones. Most of these companies adopt the state-control mode, many are in the absolute country-holding status. Due to the absence of state-owned equity as the ultimate owner, as well as the prevalence of insider control and the controlling shareholder in the listed companies, the company are often under control of large shareholders and insiders. This leads to a consequence that large shareholders and insides of listed companies gain the ultimate control, at the same time, infringe on the interests of small and medium shareholders through various means of obtaining the company's controlling resources. The mode of state-owned shares in absolute holding state, is not only conducive to the development of the company, and resistant to the running of an effective mechanism of capital market. This article attempts from the perspective of equity balance and put forward the solution for the problem of large shareholder control.This research paper is divided into six parts:The first section presents the background and significance of the topic, clarifies the basic concepts, then makes a literature review of the large shareholders control and equity balances' impact on corporate governance, proposes the research ideas and methods;The second part is the theoretical basis of this paper, introducing contract theory, corporate governance theory and capital structure theory; The third part describes the symbol of major shareholders control and its impact on the corporate governance in China's listed companies, indicating the necessity of equity balances; then theoretically analyzes the mechanism of equity balances.The fourth part gives an empirical research of the equity balances' impact on corporate performance. The empirical results are:(1) enterprises under the equity-balance structure perform better than that non-equity-balance ones.(2) the equity balances have inverted u-shaped relationship with the company's operating performance. Part five puts forward policy recommendations based on the empirical research. The main policy recommendations is: optimize the equity structure of listed companies to deepen the shareholding reform in state-owned enterprises, actively developing institutional investors; Improve the company internal governance mechanism through the general meeting of shareholders, board of directors, board of supervisors, to restrict large shareholders; Also, to strengthen the legal protection of small and medium-sized investors. The sixth part is research conclusions and future prospects. The sixth part is research conclusions and future prospects.