Ultimate Controlling Shareholders, Governance Environment And The Technical Efficiency Of Companies

The company's principal agency problem is the expropriation by minority controlling shareholders when the ownership structure is concentrated.Through researching the data of 383 Chinese listed companies in the manufacturing sector during the period of 2004-2006,this study empirically explores the agency problem of ultimate controlling shareholder.By using the data envelopment analysis(DEA) method to assess the technical efficiencies(TEs) of Chinese listed companies in the manufacturing sector,we find that TEs are ordinary in general terms,and tend to be divergent.In the Eastern area, TEs are high,but in contrast the Western.And TEs also have differences among the different ownerships.For the samples of 383 companies,it is shown that the control rights of ultimate controlling shareholders are high,and exceed cash-flow rights obviously.Based on panel data regression techniques,the empirical research in this study finds that TE is negatively correlated to the separation of the cash flow right and the control right,while the cash flow right has a significant positive incentive effect.Furthermore,this study finds that the characteristics of agency costs are different from the types of ultimate controlling shareholders.Compared to the private controlling shareholders,the state-owned controlling shareholders,especially the local state-owned controlling shareholders,their agency costs are higher,and they are more likely to expropriate the benefits of company via the separation of the control rights and cash-flow rights.In addition,this study finds that the external governance environment has a significant influence on the agency costs of ultimate controlling shareholders,but such an influence majorly exists in the local state-owned listed companies.