Study On Governance Effect Of Check-and-balance Ownership Structure Based On The Perspective Of Chinese Listed Acquiring Companies

China’s share-trading reform provides an opportunity for non-tradable shares oflisted companies to flow freely in the stock market. However, judging from the presentsituation, the refrom has not completely changed the excessive ownership concentrationin many listed companies. Under concentrated ownership the agency conflict betweenbig shareholders and small shareholders has become the most urgent corporategovernance problem needed to resolve. On one hand, some Chinese scholars have foundthat in merger and acquisition activities, large shareholder agency has an obvioustunnelling effect, which suggests that big shareholders can snatch private benefits ofcontrol by means of M&A transactions. However, on the other hand, several studieshave showed that M&A transactions are advantageous for Chinese acquiring listedcompanies. The analysis of the underlying cause leading to different conclusions gives aclue to the optimal design of ownership structure. And the check-and-balance ownershipstructure that more than one big shareholders control the company jointly is consideredto be a governance pattern that is more likely to restrict the self-interested behavior ofbig shareholders in a number of domestic and foreign articles. Thererfore, furtherstudies are needed to settle these questions that whether the check-and-balance degreeof shareholders is a key influencing factor of M&A performance how the governanceeffect of check-and-balance ownership structure is transfered, and what factors willaffect the check-and-balance effect.In view of the above analyses, this paper has disscussed the governance effect ofcheck-and-balance ownership structure based on the perspective of Chinese listedacquiring companies. The results shows that:(1) The higher the check-and-balancedegree is, the better the M&A performance and acquiring firm value will be.(2) Thecheck-and-balance ownership structure can effectively restrain the collusion betweenbig shareholders and executives, cut down the private benefits of executives and therebypromote M&A performance. It can also reduce the happening of informationmanipulation in M&A transactions, improve M&A disclosure quality and thereforeincrease the acquiring firm value.(3) Ownership natures of big shareholdres andidiocyncratic expactations of investors have impacts on the check-and-balance effect. Incompanies whose first and second big shareholders have the same nature of ownershiprights, the check-and-balance ownership structure cannot play an active role, but in companies whose two biggest shareholders have different ownership natures, thecheck-and-balance degree has a significant positive relationship with M&Aperformance. Compared with a lower level of idiosyncratic expectations, when the levelof idiosyncratic expectations becomes higher, the positive influence ofcheck-and-balance ownership structure on M&A performance will be sharplyweakened.Compared with related research, this paper has several contributions in:Firstly, this paper comprehensively analyzed the influences of check-and-balanceownership structure on acquiring companies’ M&A performance.While researchingM&A transactions, many scholars have brought ownership structure into their studyscope. But, they mostly focused on the influences of ownership concentration andownership nature, and rarely investigated the effect of check-and-balance relationshipsamong big shareholders in ownership structure. Therefore, this paper contributes tothe extension and perfection of researches on influencing factors of M&A performance.Secondly, this paper didn’t simply focus on studying the relationship betweencheck-and-balance ownership sturcture and M&A performance, but deeply analysed theaction mechanism of governance effect of check-and-balance ownership sturcture onM&A performance and made up for the lack of researches on it.Thirdly, this paper also examines factors that may influence the check-and-balanceeffect. Those factors were selected partly with the help of literature analyses and partlyin virtue of model deductions. And the final empirical tests found that these factors hadindeed impacts on the check-and-balance effect. On one hand, it is the further validationof existing research results, and on the other hand it also provides new theoreticalperspectives and empirical evidence, which makes the research on governance effect ofcheck-and-balance ownership structure more detailed and complete.