The Research Of The Governance Effect Of The Debt Structure On The Ultimate Ownership

Prior research found that ultimate ownerships exist in most countries and regions. Ultimate ownership controls listed companies by the way of pyramid control structure, which causes the separation of cash flow rights and voting rights. The interests conflict among small shareholders, creditors and ultimate controllers become the significant features of the equity centralized corporate governance. China is in a period of economic restructuring, so there are a large number of listed companies controlled by the ultimate controller. Moreover, because of the imperfect legislation and regulation, the ultimate controllers have the opportunity to tunnel listed companies. Several examples of listed companies"tunneling"by the ultimate controllers caused wide public's concern. Scholars studied the ultimate controller in terms of ownership structure and corporate governance structure, but creditors as stakeholders are rarely involved in these studies. Could debt financing constraint the ultimate controllers? Do the various features of debt contracts governance have effects on ultimate controllers?Based on the formation and implementation mechanism of ultimate controller, this paper analyzes the governance effect of the characteristics of debt contract on ultimate controller, and then discusses the governance effect of system background of ultimate controller of different nature of equity on debt structure, which provides a theoretical basis for empirical study. After empirical test for the governance effect of debt structure on ultimate controller,based on a sample of listed companies in 2007-2008, the empirical results show that the ultimate controller feature does affect the ultimate controller's behaviors, thus term structure and arrangement construction of debt can restrain controller's behaviors. However, because of difference between system backgrounds of ultimate controller of different nature of equity, the governance effect between ultimate controller's behavior and debt contract on ultimate controller also will be different. Private ultimate controller accords more with LLSV paradigm analytical framework, and the restriction effect of debt contract on private ultimate controller is also stronger. Finally, according to the previous research findings, we make several recommendations about to strengthen governance of debt contracts of ultimate controller in improving internal governance structure, improvements the legal protection system, improvements reform of commercial banks and development of bond markets.