The Ownership Structure Of Business Group

Pyramidal ownership structures are prevalent around the world. However, the literature concerned is rare. As to the current situation that there exists no perfect theory which can explain universality of the pyramidal structure in business group, one of the typical theories is adopted and deepened with improved model whose object is family business group to provide answers to the universality of the pyramidal structure. This theory holds that pyramidal structure arises not only for separating cash flow from voting rights.In the first place, the paper systematically reviews the foreign and domestic researches on pyramidal ownership structure, which involves the conceptof the pyramidal ownership structure, the prevalence around the world of the pyramidal ownership structure, the characteristics of the pyramidal ownership structure, the influence of the pyramidal ownership structure and reason analysis on the prevalence of the pyramidal ownership structure. Then, on the basis of literature review, an present typical model with relaxed conditions are developed, which is on the choice of the ownership structure involving the pyramidal ownership structure and the the horizontal ownership structure, with the target of concluding the factors influencing the choice. The model shows that the essential reason is that it can bring asymmetry of cost and benefit to the controlling shareholder. The asymmetry of cost and benefit is caused by the separation of cash flow rights and control rights which is the feature of the pyramidal ownership structure. The extent to the asymmetry is decided by the characteristic of the firm involving investment cost and revenue and investment protection under the law frame. In another word, the determinants of the prevalence are its own feature, the new firm feature and external law environment.In the following place, especially, the focus is on the analysis of the prevalence of the pyramidal ownership structure in business group of our country. According to the feature of the controlling shareholder, the business group is divided into state controlled business group and private controlling business group. The analysis concludes that, as to the state controlled business group, listed company is playing the role of both financing tool and state government's performance, while with the pyramidal ownership structure, the two opposite objects can be simultaneously achieved. As to the private controlling business group, listed company is playing the role of internal and external finance channel and the channeling tool for the controlling shareholder. Besides, on the influencing factors of the pyramidal ownership structure, the paper lists five key factors involving the listed company's operating performance and its prospect, the extent to market-oriented in its region, the extent to government intervention and law perfection, the level of its corporate governance, its industry.At the end, according to the preceding analysis, suggestions on how to protect rights of the minority shareholders are presented. The paper also notes the shortage of the research which provides the direction for future further research.