The Impact Of Ultimate Ownership Structure On Choice Of Capital Structure

The majority of corporations in China exhibit highly concentrated ownership, and it is common that most of listed companies have the ultimate controller, and in hands of which show a sharp divergence of cash flow rights from control rights. These corporations are typically controlled by State or families, and mainly achieved it by pyramidal holdings. Besides, the general manager may be sent by ultimate controller; all of these phenomenons constitute the Chinese unique ultimate ownership structure. The ultimate can affect the choice of Capital Structure differently by arrange this unique ultimate ownership, thus may Enhance or mitigate conflicts between the ultimate controller and minority shareholders, this study is focus on studying respectively the impact of the four structure respect on choice of the capital structure, so as to discuss the agency conflicts between ultimate controller and minority shareholders.Specifically, by using least squares method, this empirical study analyze how ultimate ownership structure affect the capital structure based on the research of Chinese 1377 listed companies in 2009. The result finds that:(1) the divergence of cash flow rights from control rights leads to the higher debt level, especially Trade credit. (2) pyramids layers have a significant positive relationship with the capital structure, and the relationship between them is far more significant in companies ultimately controlled by family than state. (3) ultimate controller belongs to state have a significant positive effect on leverage, but the family and other non-state corporations had no obviously positive impact on the capital structure decision.(4) different from previous literature, this study discovered that corporations that general manager is sent by the ultimate controller have a lower leverage, especially company is owned by family, but the manager sent by state ultimate controller has a positive impact, but not obvious.Studying the impact of the ultimate structure on choice of the capital structure has its theoretical and practical meanings. the most of the current domestic literature that study how the ultimate controller affect the choice of the capital structure through studying the divergence of cash flow rights from control rights on capital structure, and these research didn't deeply and comprehensively study the impact of the ultimate structure on choice of the capital structure, and this paper do this job and provide a deep view between the agency conflict between the ultimate controller and outside investors (minority shareholders and creditors), also give some advise on improving the perfect corporate governance.