Research On Non-efficiency Investment In Family Companies Under Pyramid Shareholding Structure

Nowadays, with the development of the private economy in our country, more and more China listed family companies begin to come forth. Researches show that most of China listed family companies' ultimate controlling people choose pyramid shareholding structure. The ultimate control people build complex pyramid shareholding structure in order to achieve control rights. Though the family companies had been working better, there still exist some problems in the operating management, and these cause plenty of experts pay close attention to the pyramid shareholding structure. The company's investment policy would affect the foundation for the growth of future cash flow and give motivation for future development. The ultimate control people realize their profits by making different investment policy. However, the information asymmetry in the capital market and agency problem would influence the investment policy. So the investment policies are not always effective. The non-efficiency investment hindered the development of the company also waste the resource of the companies.First of all, the paper reviews the literature of pyramid shareholding structure and non-efficiency investment, summing up theories related to pyramid shareholding structure and non-efficiency, then put forward of hypotheses on the base of theories. Finally empirical study has been finished by choosing China listed family companies from 2008-2010 as a sample. There are five parts in this paper. The first part is about research background, the significant of the topic, research review, main content as well as the frame of the paper. The second part is about the present theory of pyramid shareholding structure and non-efficiency. The third part comes up with the hypotheses and establishes the multiple regression models. The fourth part focuses on the empirical study and outcome analysis. The fifth part is the conclusion and policy suggestion.Results show:(1) Most China listed family companies exist investment-cash flow sensitivity; (2) The financing constraints based on information asymmetry will lead to the non-efficiency investment behavior of the companies; (3) Under high financing constrains, the ultimate control people would choose under-investment; (4) Under low financing constrains, the ultimate control people would choose over-investment in order to achieve control rights private profits; (5) Fixed control rights, the bigger the cash flow rights, the lower the over-investment level; (6) Relative to the non-separation family companies, the separation family companies are more likely to choose non-efficiency investment, and the higher of the separation level, the more serious of the non-efficiency investment in the company; (7) More free cash flow would lead to over-investment,while less free cash flow would lead to under-investment.