Ownership Structure And Corporate Governance Of Listed Companies

Ownership structure plays a fundamental role in terms of corporate governance and therefore is an important factor determining the whole institutional arrangement of corporate governance. Ownership structure means the distributing and matching status between the right of corp. control and the right of demand for residual value, including the degree of ownership centralization and shareholder identity etc, which are composing factors of ownership structure. In our eyes, ownership structure has impact on the behavior of corporate governance and furthermore has influence on the corp. performance and corp. valuation. This article provides us with an analyzing framework called "Ownership-Corporate Governance-Performance", studying how such factors as ownership centralization, shareholder identity, management shareholding will work on ownership structure.This research states that specific attributes of ownership structure is a determining power affecting corporate governance and its efficiency among all the factors affecting corporate governance. The degree of ownership centralization has a direct influence on lots of relationships such as mangers versus shareholders, shareholders versus shareholders and shareholders versus other partners of interests like creditors. In the case of a high ownership decentralization, which is any single shareholders only holds a quite small proportion of a corp.'s shares, a single shareholders will never has any impulse to supervise corporate management. Then the behavior of free-rider will turn out to be a Nash-equilibrium as a result of all players' gaming and lead to the cost of agency at the high side. On the contrary, major shareholders' manipulation and expropriation could be the most severe problem in a firm in which a single shareholder almost possesses all the stocks. Shareholder identity also imposes. far-reaching effects on corporate governance in that the valuation of equities that is of different voting title should be different. Different identities of shareholders will naturally cause different behavior. The most typical example as far as this issue isconcerned is the striking behavioral difference when we contrast state shareholders with private shareholders.Owing to the special historical problem, the Chinese listed companies form somewhat misshapen ownership structure, which could be boiled down a series of phenomena like a single shareholder owning major shares of a firm, state owning almost all the listed companies, lack of competition among shareholders, market absence of corporate control power. The aftermath is insider control and major shareholder's grabbing corp. resources.The conclusion of this article is that the main obstacle of the improvement of corporate governance of Chinese listed company rests with the major shareholders' state-owned characteristic by means of a four-dimension empirical analysis covering the degree of ownership centralization, shareholder identity, internal and external shareholders and non-homogeneity of ownership. A heal-all prescription for the problem of Chinese firms' cost of agency is optimizing their ownership structure. Specifically speaking, properly concentration of ownership, ownership balancing among several major shareholders, free-floating of all the shares and state shareholders acting as free-riders in corporate governance are our choices in optimizing Chinese firms' ownership structure.