The Influence Of Ultimate Ownership Structure On Bank Loan Contract

Bank-loan financing is better than bond-financing:the borrowers and the bank can make loan-terms negotiated. While bond financing is impossible on terms of negotiation. Witn un-developed domestic bond market, bond issue will be subject to strict restrictions. So Chinese enterprises will acquire needed funds by the bank loans usually.Enterprises can get more information than the bank. The rational agent assumption that enterprises may conceal or provide false information, which will cause serious information-asymmetry. If the borrower’s information-asymmetry and agency problems are more serious, the bank will likely to raise lending rates, tightening non-price terms (such as reducing the amount of loans, shorten the loan period and improve the loan guarantee requirements, etc.) to compensate for the high risk of default, to strengthen the supervision and potential loss. Therefore, how to design a reasonable and effective bank-loan contract is not only a hot spot in academic circle, which also is a key problem to the construction practice of financial markets to be solved.The theory of the ownership concentration has get the attention of the theoretical circles, La porta et al.’s (1999) research paradigm has been demonstrated. The majority of researchers began to believe:There are actual owners in the enterprises, who are the sense of ultimate controller. Because of the Agency problem, the ultimate controllers can really control the enterprises, and can exchange more control rights with less ownership, which give birth to separation of the two rights and the predatory motivation behavior.Based on this train of thoughts:how dose the ultimate ownership structure influence business decisions, what kind of risk will they bring to the enterprises’ operation. When they make the credit decision, what kind of impact will be considered? This paper analysised the relationship between ultimate ownership structure and bank loan contracts through the construction of the study sample with empirical analysis.This paper uses the data between 2010-2014,the A shares which in Shanghai and Shenzhen. In the perspective of ultimate ownership structure, constructed an balanced panel data,to analysis the relationship between ultimate ownership structure and bank loan contracts.The ultimate ownership structure of the four variables were used to proxy on bank loan in the research. The results showed:(1) The enterprise will be poor corporate governance when the ultimate control right deviation and separation right is larger. The possibility of occuping the assets of the company is large. With companies operating risks, there will be higher cost on the bank loans:higher interest rates, lower bank maturity, short term bank loans and security requirements.(2) The creditors generally believe that enterprise with higher cash-flow rights,the governance risk is low. So in terms of access to bank loans, bank loan interest rate is lower, bank loan amount is more, and for longer periods of time, with low loan guarantees.(3) Because of the nature of the state as a guarantee, the enterprise whose ultimate owner is the state will get more than other non-state-owned enterprises to obtain financial support. So creditors believe the business risk is relatively low. And the bank loans will with lower loan interest rates, more amount, longer term and low loan guarantee requirements.