The Influence Of The Separation Between Ultimate Ownership And Ultimate Controlling Rights To Private Benefits Of Control

The purpose of this paper is to research on the influence of the separation between ultimate ownership and ultimate controlling rights to the private benefits of control. On the basis of our result, we suggest our government to limit controlling shareholders and protect minority shareholders. Our sample includes a unique data set of 121 of China family-owned list companies, and 30 transactions floated from 2002 to 2004 on controlling stock exchanges. We focus on three research questions, First, private benefits of control(PBC);Second, the proportion of ultimate ownership and ultimate controlling rights; Third, influence of the separation between ultimate ownership and ultimate controlling rights towards the private benefits of control.This empirical examination shows the proportion of ultimate ownership in family-owned firms in our country is 22.242% in average, the proportion of ultimate controlling rights is 34.4296% in average, Separation Quantum of Ultimate Cash Flow Rights and Ultimate Control Rights(SQ) is 62.1007% .Furthermore, this empirical examination shows the separation of ultimate ownership and controlling rights ranks the highest in East Asia. The minimum value of the private benefits of control is -85.66%,the maximum value is 190.01%,the average value is 26.5581%. In contrast, the PBC of family-owned firms in China are higher than Anglo-American legal tradition countries. The research implies the expropriation of controlling stockholders towards minority shareholders is relatively serious.The empirical examination of influence factors to PBC implies there is not statistically correlation between the proportions of ultimate ownership, ultimate controlling rights and SQ to PBC.PBC do not correlates statistically to financial position and financial level. PBC do correlate positively to the free cash flows owned by controlling shareholders and the management participation of controlling shareholders. There is negative correlation between corporation scales to PBC. We suggest our government to improve corporation governance of family-owned firms in our country from ownership structure to protect the interests of minority shareholders.