Effect Of Corporate Control Transfer Of Listed SOEs, Changes Of Ultimate Controller On Firm Performance

Control Right Transfer (CRT) is a historical problem,and the change of firm performance is one of the kernel content in this "transfer" field study. Based on the important corporate governance character of "State-owned-holding" of Chinese companies (Huihui Shen, Liansheng Wu et al 2010) and the distinctive institutional background of China, One of the important task for SOEs' reform is how to enhance firm performance of SOEs while maintaining state—wned property rights. The key issue discussed in this thesis is to examine the impact of transfer of corporate controlling right on performance change between Chinese listed state—owned enterprises (SOEs), based on the sample of 37 listed SOEs (2006) on A stock market.By using both comprehensive indicators (principal analysis and factor analysis) and single indicator (ROA) as benchmark to measure the change of operating performance from the vertical and horizontal dimensions exploring the effect of takeovers and the relevant change of ultimate control on firm performance and the difference on operating performance improvement between subsamples of takeovers and the change of ultimate control.Major results indicate, relatively (1) CRT between listed SOEs generate improvement taken as a whole; (2) Compared to the subsample of listed SOEs without transfer in ultimate controlling right, transfer of ultimate controlling right has a much better effect on firm performance leading to a higher post-transfer operating performance appreciably.The empirical evidence is consistent with the results proposed by Yunxia Bai (2008).The essence of implementing corporate controlling right transfer is a process to relocate scares economic resource of corporate controlling right.The main concern in this field is to identify whether this relocation process could improve the subsequent operating performance after the transfer and contributed a positive impact on optimizing allocation of scares resources effectively within the scope of those related companies. The measure of operating performance for transfer of corporate control needs to be explained by empirical proof.With the course of deeper reform of Chinese SOEs, the market for corporate control has gradually exerted an positive function on optimizing allocation of scarce listing resources., and has become a beautiful scenery in capital market.From the micro perspective, it is vital to research on the corporate governance experience of those listed SOEs (the mainstream and backbone among all listed companies) which have occurred the events of transfer of control right and relevant transfer of ultimate control right by investigating the empirical influence of post-acquisition operating performance on the event of corporate controlling right transfer of Chinese listed SOEs and a huge demonstration effect will be exerted on promoting the sound and fast development of Chinese overall listed companies and the relevant empirical proof brought by the ultimate changes of corporate controlling right transfer examined is also accumulated; from the macro level, it is also beneficial to do this research to help restructrure the industrial structure of state-owned economy, optimize the efficiency of state-owned economic resources increase the value of state-owned assets, to ensure that ultimate state-owned property right be safeguarded.This paper consists of four sections as follows:Section 1:An overall introduction of the concept of "Control Right" by illuminating the economic meaning of corporate control right and identifying the concept of "The Change of Ultimate Control" as inter-provincial transfer of control right (Yunxia Bai 2008);Section 2:Theoretical literature review. This section briefly introduces theories on the motivation of the control right transfer and describes the institutional background for Market for Corporate Control in China's stock market.Section 3:Empirical literature review. review and comment on relevant empirical papers and research methods home and abroad on the concerning field aiming at providing a basic theoretical background for the following study of empirical research highlighted in section 4;Section 4:Procedures and results of empirical study on the impact of takeovers and the change of ultimate control on operating performance by using financial data of 37 sample listed SOEs in China in 2006.Comparision of the empirical difference on operating performance improvement between the two types of the subsamples of change of ultimate control and those are not is concluded;Section 5:Conclusion inferred and suggestion.The character of this thesis:Firstly, selecting sample listed SOEs in 2006 (during share- splitting-reform period); Then classifying the 37 sample listed SOEs (2006) into two types for further empirical analysis:subsamples of change of ultimate control and subsamples of non-change of ultimate control; Detailed empirical design is as follows: Setting a financial indices system to measure the long-term operating performance of sample listed SOEs within a sequential span of four years' observation (1 years pre—event and 3 years'after—event); Then by the empirical power of using principle components analysis, factor analysis combined with non-parametric Wilcoxon signed-ranked test (results of parametric test and non-parametric test are mutually inclusive in general)The empirical results in this thesis shows, that generally, transfer of corporate control between listed SOEs can help improve firm performance, in addition, listed SOEs which have been transferred via ultimate control right gain significant higher improvement on firm performance than those are not. Empirical results of this thesis have important implication that the development of the market for corporate control can strengthen the economic foundation of China, and may help better balance the allocation of scarce resources by the means of market-oriented operation while maintaining the ultimate control of Chinese listed state-owned enterprises.