Study On The Impact Of The Type Of Ultimate Controllers On Investment Behavior Of Listed Companies

After the separation of ownership and management, study on agency conflicts around principal-agent theory is enriching and extending gradually. Initial research focused on agency conflicts between management and shareholders, and then extended to agency conflicts among creditors, management and shareholders. With centralized ownership structure, difference of interests among different shareholders who holds shares in different proportions was concerned by scholars. In1999, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer traced ultimate controlling shareholders based on equity control chain, and proposed the theory of ultimate control. The ultimate controlling shareholders behind the largest shareholders control the firm by complex structure arrangement and gain private benefits of control through more subtle means. Using investment to control more resources and get a channel to grab private benefits of control is one of the ways by which the ultimate controlling shareholders encroach on the interests of minority shareholders. The present research about investment from the perspective of the ultimate control is still very little, and the conclusions are not totally consistent. The current study is limited to a certain kind of ultimate controlling shareholders, and the previous scholars haven’t subdivided the type of investment further. I enrich and refine the study about the relationship between investment and ultimate control. In face of the complex domestic and international economic situation, It’s very significant to deeply study the affect of corporate governance mechanisms to the investment behavior in our country, and then adjusting and guiding the investment behavior of Chinese enterprises to promote healthy and sustainable development of China’s enterprises and the enhancement of core competitiveness of the manufacturing in China, and moreover accelerating the transformation of the developing mode of Chinese economic.I analyze the affect of types of ultimate controlling shareholders to different kind of investment, based on the theory of ultimate control, in this paper. Firstly Ⅰ review the relevant theory and research results, and then do a theoretical analysis on the affect of types of ultimate controlling shareholders to investment behavior. Referring to previous research, I divided listed companies into three types, namely listed companies controlled by central government or its group, listed companies controlled by local government or its group and private listed companies. And I divided investment into four types, namely fixed assets investment, intangible assets investment, long-term equity investment and R&D investment in my research. I select data of A-shares listed companies from2008to2010which meet special requirements, and then use descriptive statistics, nonparametric tests and multiple regression analysis etc. I study whether there are differences in the scale of different kind of investment among various kinds of listed companies or not, and I analyze the extent of excessive investment in fixed assets, intangible assets and long-term equity investments and the extent of the lack of R&D investment of various kinds of listed companies. Through theoretical analysis and empirical research in this article, I draw the following conclusions:(1) there are differences in the scale of intangible assets investment among various kinds of listed companies;(2) there are differences in the absolute amount of R&D investment among various kinds of listed companies;(3) About the scale of excessive investment on intangible assets investment and long-term equity investment, private listed companies is the most; listed companies controlled by central government or its group is in the middle; and listed companies controlled by local government or its group is the least. We can draw from the above conclusions that excessive investment in intangible assets and long-term equity investment more likely to be used for the acquisition of the private benefits of control, and private ultimate controlling shareholders are more likely to use excessive investment of these two kinds of i..vestment to grab private benefits of contrc.. Based on these conclusions, I proposed some suggestions to strengthen the supervision and the protection for small investors, and to regulate information disclosure and investment behavior of Chinese listed companies, in order to help Chinese listed companies develop more healthy and rapidly.