The Research On The Relationship Between Ownership Concentration, Power Balance With Shareholder Structure And Operating Performance After Share Reform

The relationship between ownership structure and operating performance has been the focus of corporate finance research during the past 30 years. The focus includes two issues which are the relation between ownership concentration and operating performance and between power balance with shareholder structure and corporate performance. Many domestic scholars against the background of dual equity structure who concluded the factors affecting operating performance have targeted state-owned shares. They suggest to improve the performance of listed companies by decreasing the state-owned shares. April 29,2005 share reform resolves the problem of dual equity structure. So the relationship between ownership structure and operating performance has to be re-examined after the share reform. Another problem is that the existing researches concern one aspect of ownership structure, lacking researches on relationship between two aspects. So another purpose of this article is researching the relation between the two aspects, and it's effect on operating performance.Based on those, the paper selected 193 listed companies which has completed share reform by the end of 2005 as samples. The period of the panel data is from 2006 to 2009.We choose ROA,CROA as explained variables, and FST (ratio of the largest shareholder),HERF (square of shareholding ratio of the largest),DUM (balanced equity which is dummy variables) as the explanatory variables. In addition, we choose RATIO (ratio of inside directors),TOP (shareholding of manager), CHANGE(dummy variables which means changing the manager) as controling variables to investigate how the ownership structure influence operating performance by administrative structure. The controling variable DE (rate of assets and liabilities) also reflect the influence of external stakeholders on operating performance. Descriptive analyse suggests that the concentration of ownership is decreasing generally. Company performance under dispersed ownership and highly concentrated ownership is higher than relative concentrated ownership. Operating performance under power balance with shareholder structure is higher. The lower the concentration of ownership, the easier the power balance with shareholder structure come into being. Further research by establishing a regression model found that the relation between operating performance and FST is U shaped.DE has a negative effect on operating performance. The negative effect of RATIO on operating performance is not significant. TOP has a significant positive effect on operating performance. Manager replacement is not good for the operating performance. Power balance with shareholder structure has better operating performance.According to the results of empirical research, operating performance behaves better when lies in the two extremes. The reason is that the debt ratio is higher when ownership concentration lies in the middle, meanwhile, stimulation mechanism is weak, and supervision is deficient. Power balance with shareholder structure can promote the operating performance for the lower debt ratio, the higher level of managerial ownership. The binding force of power balance with shareholder structure is stronger which the ownership concentration is separate. The reason might be the differences in debt ratios. Current changes in ownership structure is reasonable, shares of the largest shareholder is downward on average when the concentration is low, while upward when the concentration is high. The reduction of ownership concentration overall is good for the formation of power balance with shareholder structure.Empirical findings show that improving operating governance to enhance the performance needs mechanism which is good for the creditors.Besides, effective manager market and mechanism of proxy contention is also important.