Characteristics Of Pyramid Structure, Political Connection And Affiliated Guarantee

Pyramid structure is widely used in private listed companies, the scholars pay closeattention to the phenomena of the ultimate controller obtain interests by tunneling. Thereis abundance of research in academia about the problem that how pyramid structure affectthe behavior of tunneling of controlling shareholders, however, in these research,separation factor of control right and cash right is always used to measure pyramidstructure, less literature analysis layers quantity and layer quality. In the paper, affiliatedguarantee is used to substitute for tunneling, in the purpose of observing how eachcharacteristics of pyramid structure affects affiliated guarantee.Based on literature review about pyramid structure, affiliated guarantee and politicalconnection both in China and abroad, the paper analyzed the influence of pyramidstructure characteristics on affiliated guarantee behavior, and the differences of theinfluence under different political connection situation and economic environment. Thenused private manufacturing listed companies from2006to2011as research samples tomake empirical confirmation, measuring the characteristics of pyramid structure inpyramid layers, the separation of control right and cash right and layer quality, then foundthe impact of pyramid structure on ultimate controller behavior. Then, this dissertationstudied that will political connection and economic environment have significantinfluence on the relevance between the characteristics of pyramid structure and affiliatedguarantee?This research mainly reached the following conclusion:(1) the three characteristicsof pyramid structure have significant influence on affiliated guarantee. There is a positivecorrelation between layers and affiliated guarantee, a positive correlation betweenseparation degree of control right and cash right and affiliated guarantee. There is anegative correlation between layer quality and affiliated guarantee.(2) The degree ofaffiliated guarantee in private listed companies which have political connection is lowerthan those which don’t have the political connection, at the same time, the influence ofeach characteristics of pyramid structure on affiliated guarantee behavior is not significant,which reflects the governance effect of political connection.(3) The listed companies thatare in the economically developed eastern areas of China compare to those are in theMidwest of China, the influence of pyramid structure characteristics on the affiliatedguarantee behavior is more significant. This paper provided policy advice to establish and improve relevant laws and regulations, strengthen the supervision of private listedcompanies which are under pyramid structure, and to protect the interests of minorityshareholders.