The Impact Of Characteirstics Of Ultimate Controllers On Capital Structure

Since La Porta et al (1999) proposed the concept of ultimate controller, the logicalstarting point of corporate governance has undergone fundamental changes.Domesticand foreign scholars through research found that the main contradiction was not theconflict between the managers and owners in modern corporate governance,butthe conflict between the company’s internal controlling shareholders and minorityshareholders outside. However,the internal controlling shareholders were actuallycontrolled by the ultimate controller. Implicit and complicated ultimate control rightscause the same stock but with different power, small stocks but with big power,which leads to the "tunneling effect", making the ultimate controllers try all means totransfer the assets of the listed companies, resulting in damaging the interests of smallshareholders.In china, due to late starting of the stock market, the legal mechanism ofprotecting the interests of small shareholders is not perfect. In addition, the marketmechanism restraining the behavior of large shareholders has not been established, alot of problems of security market are mostly related to the ultimate controllers.According to that" the controlling shareholder will inevitably affect the financialdecision",ultimate controller willcertainlyaffect thecompany’s capitalstructur-e decisions. Therefore, this paper trace to the ultimate controller, investigate about the effectsof the ultimate controller’s three characteristics to the capital structure, which are theseparation of control rights and cash flow rights, kinds and control layers. This hasimportant academic value and praxis significance to protect the benefits of smallshareholders and consummate the mechanism of corporate governance.This paper takes the combination of empirical research and normative researchmethod, of which empirical research is the core. On the basis of summarizing thepredecessors’ research literature, this paper first introduces relevant theoreticalknowledge of the ultimate control right and capital structure,and then analyzes thecurrent situation of the ultimate controlling shareholders and the capitalstructure.Finally, taking3401A shares of listed companies in Shanghai and ShenzhenStock Exchange from2008to2010as the sample data, by means of correlationanalysis, T test, multiple linear regression method we conduct empirical analysis onthe characteristics of ultimate controller ’s impact on capital structure, drawing thefollowing conclusions:（1） China’s listed companies generally have ultimate controllers, and theycontroll listed companies to obtain private benefits of control through the pyramidownership structure in main.（2） As for the motivation for capital structure ultimate controllers choose, theymainly considered no dilution of equity in liability,that is,the increase in liabilities caneffectively prevent the ultimate controller equity by dilution and loss of control of thecompany. From the point of view of the choice of debt maturity structure, ultimatecontrollers select more short-term debt to seek private benefits of control.（3） Compared with the state-owned ultimate controlling shareholders, the nonstate-owned ultimate controlling shareholder selects a higher corporate leverage andhas more obvious motivation of tunnelling listed companies. From the point of view of the choice of debt maturity structure,non state-owned ultimate controllers choosemore short-term debt to obtain private benefits of control.（4） The capital structure is positively related to layers of control chain fromultimate controllers to the listed company. That is, the longer the control chain, thehigher the listed company’s ratio of liabilities to assets and the ratio of currentliabilities to total capital.