An Empirical Study On Relationship Of Ownership Structure And Operating Performance Of Private Listed Firms

The typical characteristic of modern enterprises is the separation between corporate ownership and control. The ownership of the company is held by a large number of external investors (shareholders), but the company’s management rights are controlled in the hands of professional managers, who do not hold or hold a small amount of the company’s shares. Because of asymmetric information, professional managers may damage the interests of the shareholders of the company in order to maximize their own interests, so that the principal-agent problem arises in the enterprises.It is generally considered that reasonable corporate governance structure can reduce the moral hazard behavior of professional managers in the enterprise, cut down agency costs and increase the value of the company. Corporate governance thus becomes the core and focus of the modern theory of the firm. As the internal organizational structure of the company, shareholding structure is an important part of the corporate governance. Thus the relationship between ownership structure and corporate performance is becoming the focus of attention of the scholars. Early studies assume ownership structure is exogenous and believe that there is an optimum ownership structure. With this optimum ownership structure, it can improve the level of corporate governance and increase the corporate value. With further research, more and more scholars begin to notice the Endogeneity problem of shareholding structure.They think that the formation of the shareholding structure depends on the shareholders’choices to maximize their own benefit, and on this basis they further studies on the relationship between ownership structure and corporate performance.This Thesis will research the relationship between ownership structure and corporate performance of Chinese private enterprises, based on the perspective that shareholding structure is endogenous. The sample of this thesis is349private listed companies and the date is from2006to2011. First of all, this thesis describes the principal-agent theory, which is the theoretical basis of corporate governance issues, and then systematically collates and summarizes the research findings on the relationship between ownership structure and corporate performance. On this basis, the thesis will point out the limitations of domestic scholars’ research on the issue and propose the questions to be answered. Then, using the panel date of the349private listed companies, we illustrate the study design in detail, including date sources, selection of variables and model construction. After a preliminary analysis of the data, the thesis explains in detail the theoretical basis of econometric models and regression methods we choose in the empirical analysis. It is worth mentioning that simultaneous equations models are usually used to solve the Endogeneity problem, so we choose simultaneous equations to empirically analyze the relationship between shareholding structure and corporate performance of private listed company. After the introduction of instrumental variables, we use a two-stage least squares method to estimate the model.After Endogeneity test and regression analysis of the sample data, we reach the following conclusions:(1) The ownership structure is endogenous, but it shows differences on Endogeneity between the different aspects of the ownership structure.(2)There is interaction between ownership concentration and corporate performance. Ownership concentration affects corporate performance in a nonlinear way. Conversely, corporate performance has a positive feedback on ownership concentration.(3) Ownership balancing has a significant inverted U-shaped curve impact on corporate performance, but the latter does not significantly affect the former, so there is no causal relationship between them.(4)Management equity has a significantly nonlinear impact on corporate performance, but there is no sufficient evidence to prove that corporate performance affects Management equity.According to the conclusions, the thesis proposes the following recommendations to optimize the corporate governance structure:(1) To optimize the equity structure of the private listed companies, and to maintain a higher level of shareholding of the largest shareholder and higher ownership concentration, avoiding excessive fragmentation of the ownership structure.(2)To actively cultivate the market of professional managers in China, improving the level of equity incentive.(3)To improve the external governance mechanism, protecting the interests of small investors.