A Study On The Relationship Between Ownership Structure And Related Party Transactions Of China’s Listed Companies In Condition Of Full Circulation

Since the split-share reform started in2005, the major transformation of the capitalmarket has begun. The theorists and practice consider that the split-share reform wouldimprove ownership structures of listed companies and solve problems which include relatedparty transactions caused by special ownership structures of listed companies in China.Actually related party transactions of listed companies have no significant reduction, on thecontrary, the scale of related party transactions has become larger and the trading process ofrelated party transactions has become more and more complex. This means split-share reformhasn’t effectively suppressed related party transactions as expected.Based on ownership structure which affect company’s internal governance structure andprevious studies, combined the special background that Chinese securities market graduallyinto full circulation, this paper analyze the relationship between ownership structure andrelated party transactions and the implement of split-share reform.This article selected the A-share listed companies which are in the manufacturing sectorand have achieved full circulation in Shanghai and Shenzhen Stock Exchange, from2009to2011, as initial samples. After exclusion, there are410research samples in this paper.Through the empirical analysis on the four hypotheses, firstly, it prove that, as theincrease in the proportion of the largest shareholder, the scale of related party transactions willbe smaller, when the largest shareholder has absolute control of the company. Secondly, whenthe share of listed companies is highly concentrated, with the increase in the company’s equityconcentration, the scale of the related party transactions will be smaller. Thirdly, equityrestriction ratio restrains the related party transactions. Finally, it proved that the higher theproportion of institutional investors has, the smaller of the scale of related party transactionsis, when the largest shareholder has absolute control of the company or share of listedcompanies is highly concentrated. Above all, in order to regulate the related party transactionof listed companies and improve corporate governance mechanism in China, this paper, baseon the analysis of results, proposed some policy recommendations including optimizing theequity structure of listed companies, developing institutional investors, as well as improvingthe information disclosure system of related party transactions.