Pyramidal Ownership,Fluctuation Of Corporate Performance And The Cost Of Equity Capital

Pyramid structure is the ultimate controller of the company controlling over the target company taken control of a pyramid structure through a multi-level companies and indirect shareholdings in the middle way. Ultimate controller holding one company first, and then by holding the company to control another company, and so on, through the layers of holdings in order to achieve the ultimate goal of the company’s control structure, so that the target company’s control and ownership on separation occurred, making the ultimate controller can be obtained with less capital investment greater control. Previous studies have proved that there are many documents in the pyramid structure of our market presence. Who holds ultimate control through a pyramid structure of the target company’s shares, resulting in a separation of cash flow rights and control rights, increased agency costs, making the shareholder has control produced a motive harm the interests of small shareholders. Pyramid structure as scholars in the study when the angle is often divided into two categories, one is the level of features, one is the separation of ownership and features. Pyramid level is the longest chain of control between the number of persons from the ultimate control to the target company, the separation of ownership and the pyramid is the poor man’s ultimate control and ownership of control.Business performance is a prerequisite for the survival of the business, operating results reflect through performance, to the reaction of investors to understand the company’s operating performance through the reaction conditions, results are connected with the management of bond investors. Operating results are usually manifested in the form of financial statements, investors can visually observe the financial position and results of operations by operating activities of financial statements. As an investor, of course, want companies to be able to have a good operating performance, to make a profit for their investment, as the management, of course, want companies to be able to have a good operating performance, investors hire their own to provide a more adequate basis. But the results simply reflect the results of the business for some short period, from the long term effects of corporate governance is not enough to rely solely on the results of operations. Investors in addition to observe corporate earnings or not. it should be observed stability of earnings is how to improve the level of performance and steady growth is accompanied by most investors want to see. The main measure of performance ROA, ROE, etc., existing research results in fluctuations observed when these indicators take on the standard deviation to be measured.The cost of equity capital is the cost of investor funds only when the company’s future earnings are likely to get more than the cost of the time investors will inject. Financing behavior of enterprises is a hot corporate finance theory and practice of research is an important part of corporate financing behavior of listed companies is significant, reducing the equity capital, optimize the cost of debt is the pursuit of business objectives, the effectiveness of the capital market optimize the allocation of resources has a very significant impact. Current research interests are mainly the cost of capital model of capital asset pricing model, residual income model, and so on, and based on reasonable and feasible, we choose the PEG model.Development of the pyramid structure makes the agency problem between business owners and managers all the more important, and, with the advent of the ultimate controller with less cash flow rights to achieve greater control over the situation, look at outside investors, the greater the control will make the ultimate controlling person, one-man dictatorship, so they will demand a higher risk premium in the time invested. As financial markets and business organizations in the form of changes in corporate enterprises, the ownership and management of enterprises has been completely separated, they own their own assets to be liable for the debts, but the perspective is standing by its offer to shareholders All funds liable for corporate debts. But funding is not provided free of charge to shareholders, shareholders will need to pay money to get returns, while standing business perspective, companies use the funds provided by the shareholders, it is necessary to use the funds to pay a price.And as a result of business performance management, to be disclosed by management, investors after obtaining the relevant information can be analyzed, as principal of operation of the business were observed. As a business owner clients entrust the management of enterprise management, must be willing to invest capital can bring more returns, and the cost of equity capital is a measure of the returns. Before invested capital investors should examine the operation of enterprises need to come whether to invest or whether to continue to invest conclusions, analyze operating performance is inevitable, but the risk is more necessary for business operations in the long term analysis. However, due to the volatility of results form a complex process, examining the standard cost of equity capital will be affected by various factors.Since the effect of corporate governance also reflects the results of risk, then the hierarchical pyramid structure features and brings ultimate control over who controls the separation of ownership and cash flow characteristics of the results will fluctuate company listed what kind of impact? Existing literature related to the pyramid structure, performance fluctuations and bank credit research resources, research conclusions found three closely linked, especially for non-state-owned enterprises. Bank credit for businesses belonging to external financing, since the effects of the structure, the impact of fluctuations on the results of external financing pyramid, then their impact on internal financing enterprise is like? Based on the above analysis put forward the hypothesis of the study.Firstly, the pyramid structure of the relevant literature on the effects of fluctuations in the results were reviewed, carding, proposed in this paper based on two assumptions principal-agent theory, signaling theory and the theory of the tunnel, and then have the use of multiple linear regression model to the pyramid level and the separation of ownership and pyramids as explanatory variables to firm size and total assets margin, proportion of independent directors, two jobs one, revenue growth, fixed assets and total assets turnover ratio as a control variable, the2009-2011All a-share listed companies as sample data to construct a statistical model to describe the empirical correlation and regression analysis, and analysis of the empirical results of the model.Then, the pyramid structure and performance volatility on the cost of equity capital literature regression, carding, three other hypothesis put forward in this paper, but also the use of multiple linear regression model to the pyramids and performance level fluctuations respectively, and the separation of ownership and performance pyramid volatility indicators as explanatory variables, firm size and total assets of margin, the proportion of independent directors, two jobs one, financial leverage as a control variable, the2009-2011all a-share listed companies as sample data to construct a model of the same conducted a statistical description, correlation analysis and empirical regression and analysis of the empirical results of the model.The empirical results obtained to verify the hypothesis of this paper, the pyramid structure has a significant positive impact on the results fluctuate, and the separation of ownership and performance pyramid fluctuations have a significant positive impact on the cost of equity capital. By the conclusion, this paper presents some of the author’s recommendations. Companies should not blindly pursue mergers to expand the scale of enterprises, although the expansion could increase their visibility, but also shows that companies in the development, but the increase in the level of the pyramid merger could bring greater performance volatility may increase levels of the pyramid allows enterprises to increase operational risk. Already existing multi-control chain separation of ownership of the enterprise or large enterprise, you should try to "centralization" ideas. And reasonable analysis of the results of the business can not just short-term operating efficiency, should be concerned about the volatility of corporate performance. Pyramid structure can make the ultimate interests of those who control the manipulation becomes more subtle, so you should take some measures so that outside shareholders can obtain more realistic data business operating results high-quality information but also help to safeguard the interests of investors.