Competitive Industries Ownership Structure And Firm Value

Equity structure determines the distributions of residual claim right and residual control right. Different equity structures mean different distribution of interests and rights. Stockholders with different natures and stock-holding proportion have different positions and investment purpose, hence causing different corporate governance mechanism and performance. The paper analyzes how equity structure influences corporate performance theoretically, which mean how the concentration and structure of equity influence corporate performance through right balancing mechanism and principal-agent mechanism. The paper also empirically analyzes how Chinese corporate equity structure influence listed companies' EVA (Economic Value Added) and gives corresponding corporate governance and corporate valuation as well as policy recommendations.The paper firstly selects listed companies with A share in Shanghai and Shenzhen according to CCER (China Center for Economic Research) and CSRC (China Securities Regulatory Commission) industry classification criterion. It selects 997 listed companies in competitive industries with reference to 2005 and 2006 data. And it creatively selects EVA as corporate performance criterion.The paper also creatively selects competitive industries' listed companies as research subjects, excluding those of factors distraction and deviation on marketing economy rules because of natural monopoly and oligopoly or government monopoly etc, and gives a relatively more accurate illustration of how marketing economy works in corporate equity structure and value. Practically, for our country's competitive industries, there are comparatively less policy protection and resource scarcity disadvantage, other marketing economy factors can have more obvious effects, equity structure is one of the most important. So, the paper emphases the relationship between competitive industries' equity structure and corporate performance as research subject The subject of the paper involves the coordination and configuration of corporate owners, runners, employees, directors, customers etc, it also determines modern corporate organization forms and external interests group, which has significant impact on improve China corporate governance and escalating of corporate value and responsibility theoretically and practically.The research results indicate, other conditions being equal, in a certain scope, the proportion of liquidity share's increase can significantly reduce corporate EVA, which means the highly dispersed equity right makes the cost and expenditure of monitoring and controlling higher managers become very high, due to the lack of knowledge and capability, so higher proportion of liquidity ruins corporate valuation creation.While the increase of state owned share can improve corporate EVA, which means on one hand, listed companies with state owned share can still have policy and resource advantages and consequently lower capital cost, on the other hand, from the reform of split ownership structure from 2005, the state has been imposing more strict monitoring and controlling policies as well as restraint and motivation mechanism, so improving performance with state owned share. The increase of institutional share can also significantly increase corporate EVA, which means institutional investors have better knowledge and capability to monitor and exert positive influence on corporate governance depending on their sophisticated investment experience and sensitivity to self protection. The concentration of equity and higher manager share-holding proportion has negative relationship with corporate EVA. In the mean time, the paper also finds that capital structure and industry factor can also have significant impact on corporate performance, which means these two factors can motivate corporate real runners more effectively from external perspective.The paper gives empirical conclusion and theoretical reference on how to optimize corporate equity structure and governance since the reform of split ownership structure as well as how to better balance interests of different stakeholders. The paper suggests, in the research and evaluation of how equity structure influence corporate performance, we should not always take it for granted traditional hypothesis, for example, the redundant principal-agent relationships of state owned shares, while the research result is just the contrary. We should take more realistic and objective factors such as policy, economy, expectation and time into consideration so as to get more accurate and effective conclusion and ultimately optimizes our country corporate equity structure and escalate corporate value.