The Separation Of Control Rights And Cash-Flow Rights Among Listed Family Firms-Empirical Evidence From China

The separation of control and cash-flow rights attracts academic attention since La Porta(1999)'s innovative research. This thesis focuses on the separation of control and cash-flow rights among listed family firms in China. By using descriptive statistical method, OLS and Binary Choice Logit model, this thesis surveys the financial factors that affect"the separation of two rights"and the choice of pyramid model as well as how such separation influences the corporate value and performance.Through analyzing the 227 sample family firms, this thesis summarizes the overall financial characteristics of listed family firms and proves that the separation of control and cash-flow rights obviously exists with highly concentrated control rights. Moreover, pyramid structure and top management appointment by the controlling family prevail among listed family firms. Empirical reveals propose that firm size and the ROE are positively correlated with the separation of control and cash-flow rights while firm value and debt ratio are negatively correlated with separation. The results also demonstrate that such separation destroys firm value; however, the concentration of control rights benefits the corporate performance. Besides, corporate governance factors, corporate size and performance affect the family controller's choice of pyramid structure. The proportion of independent directors and firm size are positively correlated with the probability of choosing pyramid structure, while net profit and top management appointment adversely affect the probability. Finally, this thesis proposes some advice on the improvement of the capital market regulations.