The Impact Of Control Rights Transfer On The Performance Of The Listed Companies In China By Empirical Analysis

Securities market shoulders the burden of optimizing social resources disposition. To achieve this mission, it needs the share price as well as the market for corporate control to work well. When it comes to internal adjustment or external takeover, the market for corporate control is duty-bound and the ultimate result must be the transfer or the scope changes of listed company's control.In the process of control rights transfer, the private benefits of control which are gained from this behavior are inevitable.In this paper, the private benefits of control are divided into moderate and excessive ones. The excessive ones will hurt the benefit of other shareholders and the value of the company; they are negatively correlated with the performance of the firm. Alternatively the moderate ones are positively correlated with the performance of the company. Well, what kind does the private benefits of control in our country's listed companies whose control rights have been transferred belong to? Further studies still wait.The specific policy environment of our country's Securities market has critical influence on the emergence and development of control rights transfer in Chinese listed companies. Since 1994 Heng tong Co. Ltd. owned the controlling stakes of Linguangshiye Co. Ltd. The behavior of control rights transfer had happened frequently and increased year by year.But according to relevant statistics, the performance of the target companies has been so dismal. For example Guojiashiye, Yiankeji Company and Shangkelihua Company had a very outstanding performance in a shot time after their control rights were transferred, while they had withdrawn from the myth now. The studies of many Chinese scholars also believe that the performance of the target companies has the suspicion of being manipulated and it shows a declining trend in the long run. Theoretically the control right transferring is the way of optimizing resources disposition; it will produce a good marketing reaction. Instead, after transfers of companies'control, the performance of the target companies dropped in China.Therefore the article is focused on the topic we talked above to spread out analysis and research.Above all, the concept of the control right are defined. On the foundation of summarizing relative study results about control right transferring and the theoretical explanation, the paper choose the listed companies whose control rights have been transferred in the year 2004-2007 to be the study samples (we call them the target companies in this paper), Meanwhile choose the listed companies whose control rights haven't been transferred though they have carried out and completed large equity transactions in the year 2004-2007 to be the Contrast group(we call them Off-target companies in this paper).According to relevant studies of Scholars at home and abroad, the ways of measuring the performance of listed companies are generally classified into market value and book value. The period of the sample companies in this paper is from 2004 to 2007, so the relevant data will be the year of 2003 to 2009. In 2006 a big bull market emergenced, then a rare bear market followed in 2008. The market value of the companies is affected by the macroscopic factors seriously. So the paper only uses book value to measure the performance of listed companies and the multiple linear regression models is established to discover the relation of the private benefits of control and the performance of the listed companies.The listed companies'performance as the explained variable is measured by ROE. And the private benefit of control as the explanatory variable is measured by. PBC. Meanwhile we also choose the asset-liability ratio and natural logarithm of total assets as the controlled variables in the model.The descriptive statistics results demonstrate that:ROE in the target companies is 30 times as which in the off-target companies.The empirical results using regression analysis indicate that:The private benefits of control are negatively correlated with the performance of the target companies and positively correlated with the performance of the off- target companies. So we can say that the private benefits of control in the target companies have reached excess state and the off- target companies haven't. On the basis of the conclusions above, this paper begins to describe the own features of them two from the respective of ownership structure and directorate characteristic. Then empirical tests of shareholder structure and directorate characteristic are made using the target companies and off- target companies, and the Logit model is used to investigate this issue.The descriptive statistics results in this section manifest that:(1) whether the target companies or the off- target companies, the ownership structure is highly centralized. So the main problem in the corporate governance in these companies is to alleviate the contradiction and the conflict between the big shareholders and minority shareholders. (2) From Z index and S index, we can find that the ownership balancing degree is higher in the off-target companies than that in the target companies. (3) The average of some indexes is lower in the target companies than that in the off-target companies. For example:the number of Directors,the proportion of independent directorates and share ratios of executives. (4) While other indexes are higher in the target companies than that in the off-target companies. For example:share ratios of board and share ratios of supervisory board.The empirical results using logit model shows that:(1) High ownership balance degree between other shareholders and the largest one can remarkably prevent the listed companies in China from transferring the control rights. (2) The higher the proportion of independent directorates is, the more significant prevents the listed companies in China from transferring the control rights. (3) Share ratios of board and supervisory board are both positively correlated with the probability of the control rights transferring. It shows that if the board or supervisory board own shares in the company, their independence will be damaged. So they will support the CS in transferring the company's control to receive excessive private benefits of control. (4) Share ratios of the largest shareholder the number of Directors,Share ratios of executives have no significant effects on the transfer of company's control.Maybe it's because the size of the sample is not big enough or some weakness exist in the governance of the listed companies.The main contributions of this paper include:(1) explore what kind does the private benefits of control of the listed companies in China whose control right have been transferred belongs to. (2) At present, most of the researches focus on the influence of the traditional financial index to the transfer of the listed company's control in China. But there is less research concern of other index's influence. This paper has made research on the impacts of the ownership structure and directorate characteristic to the transfer of the listed company's control in China.