Empirical Study On SMEs’ Ultimate Ownership Structure And Corporate Performance

The relationship between ownership structure and corporate performance, incorporate finance,is one of hot issues common concerned by scholars. Most of scholarsstudied from the perspective of direct ownership structure during a long time. Until1999, La Porta, Lopez-de-Silanes&Shleifer brought a new concept of ultimatecontrolling shareholder into people’s eyes, and creatively proposed the method ofretrospectiving listed companies’ control chain to identify the ultimate controllingshareholder,making the ownership structure and corporate performance leap to a newlevel. In2003,The idea of La Porta et al was introduced into China by Liu Shaojia, SunPei and Liu Naiquan, opening up a new perspective for native scholars to study theownership structure.In our country, small and medium-sized enterprises account for more than99%oftotal number of enterprises, which play an important role in economic development andoperation. Small and medium-sized enterprises, however, usually show low governanceefficiency and performance level. The whole idea of this thesis is that ultimateownership structure determines the shareholders’ behavior of decision-making,and willeventually affect the corporate performance level. The thesis tries to find answer for thefollowing questions. Is there an optimal ownership structure existing in the currentlisted SMEs? How the ultimate ownership structure has an impact on the listed SMEs’performance level through financial decisions? And what are similarities and differencesamong different ultimate controlling shareholders’ impacts on financial decisions andcorporate performance level?This thesis selected the data of170companies listed in Shenzhen SME board in2008-2011as research samples,and used the portion of ultimate control right, theportion of cash flow right, the separation of two rights and the degree of checks andbalance as alternative variables of ultimate ownership structure,and selected the rate ofassets and liabilities, capital expenditure ratio, and cash dividend per share as alternativevariables of financial decisions,and selected CROA to measure the performance ofcompany.Moreover, ROE was used as alternative indicator in robustness test. The wholesamples were divided into different groups by the nature and the holding proportion ofultimate controlling shareholder. Conclusions of this thesis were as follows:1. It was found that, in the empirical study on the relationship between ultimateownership structure and financial decisions, the proportion of state-owned properties’ cash flow right over listed SMEs had a significant positive impact on the asset-liabilityratio, while the proportion of ultimate control right had a significant negativeimpact.Separation of cash flow right and ultimate control right also had a significantpositive impact. The proportion of cash flow right over relative holding group had asignificant positive impact on the capital expenditure ratio, while the proportion ofultimate control right over dispersed ownership group and relative holding group had asignificant negative impact. Separation of two rights in relative holding group had asignificant positive impact.The degree of checks and balance in absolute holding group,however, had a significant negative impact. Among non-state owned properties andrelative holding group, the proportion of cash flow right had a significant negativeimpact on the cash dividend ratio,so as to separation of two rights. While the proportionof ultimate control right had a significant positive impact. The degree of checks andbalance in relative holding group had a significant negative impact.2. It was found that, in the empirical study on the relationship between financialdecisions and corporate performance level, among state-owned properties, therelationship between capital structure and performance level showed a significantinverted U-emergence,while capital structure had a significant negative impact onperformance level among non-state owned properties and group test. The cash dividendratio among non-state owned properties, dispersed ownership group and relative holdinggroup had a significant negative impact on performance level. Moreover, in robustnesstest, it was found that part of conclusions changed, which meant that the relationshipbetween financial decisions and corporate performance level had relation with theselection of variables of performance level.3. It was found that, in the empirical study on the relationship between ultimateownership structure and performance level, among state-owned properties, theproportion of cash flow right had a significant positive impact on performance level,while the relationship between the proportion of ultimate control and performance levelshowed a significant U-emergence. Separation of two rights had a significant positiveimpact on performance level. Moreover, in robustness test, it was found that importantconclusions remained unchanged, which meant the empirical results were robust.It could be seen through the above research results that the optimal holdingstructure didn’t exist in the listed SMEs of our country. And the changes of ultimateownership structure would have an impact on financial decisions and finally influencethe performance level. But the difference between state-owned and non-state owned enterprises was relatively large. The ultimate ownership structure of state-owned SMEsaffected performance level mainly through capital structure, while the influence ofultimate ownership structure of non-state owned SMEs on performance level was notsignificant.