The Influence Of Ultimate Ownership Structure On Agency Costs

Since Berle&Means(1932) put forward the separation of ownership and control, agency conflicts of managers and shareholders began to be given attention by the theory researches. Especially, Jensen&Meckling(1976) firstly discussed the agency problem of public corporate. They found that managers were in pursue of own greatest interest at the expense of the shareholders’interest since the separation of ownership and control. Therefore, agency costs were generated and they gave it a classical definition. Since then, agency problem gradually began to be the hottest topics in the economists’researches all around the world.From the relative literatures, researches on the agency costs between shareholders and managers mainly study the direct ownership structure by researchers all around the world. And there are short of the discussions on the effect of ultimate controlling shareholder on agency costs. That may be needed to be further studied. Therefore, the paper exercises to look up the ultimate shareholder’s ownership and controlling right, and studies the effects of ultimate controlling shareholder on the agency costs between shareholders and managers.The paper uses the data of1102non-finance listed companies in Shanghai Exchange and Shenzhen Exchange, and it constructs a multi-regression model to analyze the effect of Chinese listed companies’ultimate ownership structure on agency cost. It finds that, under the control of other factors, there is a significantly relationship between the ultimate ownership structure and the agency costs between shareholder and managers. Concretely, there is a significantly relationship between ultimate ownership property and agency costs, and the agency costs of state-owned listed companies are greater than non-state-owned listed companies. The controlling right of ultimate shareholder and the proportion of free cash right are playing important role in the effect of agency costs. The more the proportion of ultimate controlling right, the lower the agency costs of controlled listed companies. When the proportion of ultimate controlling shareholders’cash flow right is high, the interest of ultimate controlling shareholder and listed companies becomes identical, and it will present a strong harmony effect of interest, and the agency costs of listed companies decreases. Anymore, the lower the number of controlling hierarchy in the companies controlled by ultimate controlling shareholders, the higher the agency costs. When there exits a second ultimate controlling shareholders, there are agency conflicts between ultimate controlling shareholders, and the monitoring of managers weakens, and the agency costs becomes higher. Lastly, there is no significant relationship between the ratio of directors appropriated by ultimate controlling shareholder and the agency costs.