Ultimate Ownership Structure And Corporate Performance In Chinese Listed Companies

According to the modern theory of corporate governance, the arrangement of ownership structure is the property rights foundation for corporate governance framework of listed companies. As one of the main issues of corporate governance, corporate ownership is concerned by the scholars at home and abroad. Especially in recent years, with the proceed of the privatization process and the liberty and integration of capital market worldwide, both of them urge people to pay attention to corporate ownership issues, especially to ultimate ownership issues and ultimate control issues.In China, since the reform and opening up in 1978, particularly since the corporatization restructuring of state-owned enterprises, both the scale of state-owned assets into private assets and the employment from the public sector to the private sector, China has undergone the largest privatization in the world. So, what kind of degree the privatization process in China has reached, whether the state is still the dominant ultimate controller in Chinese listed companies. In order to answer this questions, we must start the research form the ownership issues of the listed companies. In addition, under the background of a transition economy with imperfection in investor law and government's action making important effects on resources allocation, ultimate ownership structure and control arrangement's effects on corporate performance are greatly concerned, and clearness of this problem is also the key to understanding corporate governance efficiency.This thesis bases on Chinese listed companies, and by applying the method of tracing of control chains introduced by La Porta, Lopez-de-Silanes and Shleifer (1999) and the data of ultimate ownership and corporate performance of Chinese listed companies which covers the period of three yeas from 2006 to 2008, I investigate the ultimate ownership structures'effects on corporate performance. Firstly, by comparing the direct ownership structure and the ultimate ownership structure, we found the ownership structure of listed companies is highly concentrated, and Chinese legal person directly control the vast majority of listed companies, on the contrary the state and domestic natural persons often indirectly control the listed companies through legal person institutions, thus become the most important ultimate owners. The difference between ultimate ownership and the direct ownership structure is obvious. Secondly, through using the econometric techniques, I investigate the relationship between ultimate ownership and corporate performance in Chinese listed companies and found that the ultimate control and firm performance is a significant linear relationship; The degree of separation of ultimate ownership and ultimate control has the significant inverted U shape with corporate performance, which means an optimal degree of deviation level to make the performance of listed companies to obtain the best; Thirdly, I divided the ultimate owners into two parts:the state ultimate owner and the private ultimate owner, both of them have significant positive linear relationship with corporate performance, however, the companies controlled by the private owners has a significant better performance than those controlled by state owners; When state authority becomes the ultimate owner, due to the differences of interest and operation model in supervising state-owned asset between the different state agencies, So the variable of state is classified into state-owned enterprises, the SASAC, local SASAC and organs, compared with private ultimate owners'control, I found that the companies controlled by the private owner performance better than those four state variables.This study will provide a new analytical framework for domestic ownership structure and corporate performance. At present, most of the domestic scholars apply the direct ownership in researching the relationship between the ownership and corporate performance which directly use the official statistics data including the largest shareholder, the top five or top ten shareholders of list companies to examine the ownership concentration and the relationship between the identities of the controlling shareholder and corporate performance. The article using the method of tracing control chain introduced by La Porta, et al. (1999) to identify the ultimate owner, can accurately reveal the ownership structure of listed companies, real analysis the relationship between ownership structure and corporate performance, which will provide theoretical basis and empirical evidence for the improving the value of Chinese listed companies, perfecting corporate governance structure, and regulating the securities market.The problems of ultimate ownership of listed companies prevailed in the domestic capital market, the allocation efficiency of ultimate ownership, the complexity of ultimate control chain, the path-definition and other factors that directly affect the company's management structure and long-term development. The previous research of the direct ownership structure mainly stop at the level of the direct controlling shareholder. Both the reveal the characteristics of the ownership structure of listed companies and the research of the relationship between ownership and corporate performance can make conclusions bias, so this paper will provide strong complementary domestic ownership structure research.In addition, the study added to international research of the ultimate ownership and corporate performance. Since China's reform and opening up, Chinese economic development has maintained a strong growth momentum, and China has become an integral part of the world economy. However, there is rare research of the ultimate ownership using Chinese listed companies as sample. With the world's widely used methodology to research the ownership structure of Chinese listed companies issue, it will rich and develop this areas of research in China and the world. Lack of China's capital market research sample is not a comprehensive international research for the ultimate ownership and corporate performance.