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Study on the financial impact of Big Shareholders of listed companies

Author: GuoZuo¡¡GanShengDao From: www.yourpaper.net Posted: 2009-04-05 03:02:24 Read:
[Abstract] In this paper, empirical studies, discusses the the Big Shareholders performance, to draw the Big Shareholders problems exist will be listed on the company's cash flow situation, solvency, profitability and operational capacity have a negative impact this a conclusion, and the sound development of China's securities market is suggested.

Introduction

China's capital market has entered a new stage of development, has undergone a fundamental change compared with 15 years ago, the mainstream is no longer a speculative market. In many ways, these changes In addition to the development of capital markets mentioned the National Strategic risk structure of the securities institutions, sources of risk and risk transfer mechanism also changes. Positive role of these changes in addition to some positive, some negative issues.
Listed companies, the most important is the largest shareholder. They occupy the phenomenon of the capital of listed companies in the capital market stakeholders constraint mechanisms are inadequate oversight, the largest shareholder in the pursuit of their own interests to maximize behavior due to the distortions. There is a goal difference of interests between large shareholders and minority shareholders of listed companies, major shareholders subject to the self-interest driven, under the conditions allow, the inevitable choice to maximize their own interests, their capital gains allotment, issuance by listed companies, even by creditors to obtain private benefits, making it possible even by resorting to various means to harm the interests of listed companies, malicious funds of the Company is one of the means for its own sake.
The largest shareholder of "benefits" behavior will cause a lot of economic consequences, not only damage the interests of small shareholders, but also hinder the healthy development of the entire national financial and securities markets. Scholars emptied listed company's largest shareholder primary means of existing research, Johnson et al (2000) show that the major shareholder of this behavior may be one of the reasons that led to the East Asian financial crisis in 1997. Bertrand et al (2002) studied the case of India, the prevalence of major shareholders "benefits" behavior, and this behavior is exacerbated by the opacity of the economy as a whole.
Liu Feng et al (2004) studied the relationship between ownership structure and the transfer of benefits "way, they believe that the high performance of the company's largest shareholder ultimate purpose is not listed, high growth, but the listing of the Company's cash, is about to profits in listed companies , and let the cash flows to the largest shareholder. Zengquan Li et al (2004) Research Funds and the ownership structure of the relationship found increased and then decreased non-linear relationship between the funds of listed companies occupied by the controlling shareholder and the proportion of the largest shareholder, but with other shareholders held The proportion of shares strictly negative correlation. In addition, the control of the controlling shareholder and property rights of the nature of their funds used behavior has an important influence. Zhang Ming, et al (2005) studied the economic consequences of major shareholder funds used, the largest shareholder funds used will directly lead to the decline in profitability of listed companies, when the poor performance of the company funds used, the value of the company.
The debts Circular 105 samples selected from the Shenzhen and Shanghai Stock Exchange, including 1139, Pharmaceutical Dikang, Long CSCECL otherwise ST 62.

Second, the Big Shareholders of listed companies financial impact analysis

From the existing research results, the relationship between ownership structure and corporate performance, the academic community has not yet formed a unified, compelling conclusion. Regardless of the ownership structure and performance of the company was positively correlated U-related or non-significant correlations are established in a particular sample, specific research methods, and can not, by extension. This selection of the sample there is a significant Big Shareholders behavior, major shareholders control more serious problems, from the following comparative analysis will be significant correlation can be seen between the control of major shareholders and listed companies' financial position.

(A) attributable to shareholders of the models on the profitability of the company
The profitability of listed companies is an important indicator to measure its results of operations, and also the decision of the investor whereabouts based on its investment. In addition, profitability or business organization of production activities, sales activities and financial management of a comprehensive reflection of its direct impact on the strength of ability to play.
Look at the situation from the overall sample, the average net profit for the past three years, the return on net assets are negative, but a far cry from the average of all the A shares. In addition, its earnings per share for three consecutive years is negative, the average net assets per share is less than 16.5% of all A shares. This shows that the Big Shareholders of the existence of a negative impact on the profitability of the listed companies.
During Profitability Analysis, the focus of attention is the profit targets and ROE indicators. Revenue and expense recognition and measurement of listed companies to use the accrual basis, the matching principle, the divided capital expenditure and revenue expenditure principles, including many accounting estimates, will inevitably have to use subjective judgment. The level of profit is not always possible to reflect the strength of the profitability of the business. Therefore, only the profit targets to evaluate business performance and profitability biased, can be combined cash flow statement of cash flow information is more objective and comprehensive.

(B) a majority shareholder accounts shall the company's solvency
Solvency is the ability to repay maturing debt, all the business activities of the enterprise, such as financing, investment and business activities will affect the solvency of the enterprise.
The solvency analysis tools quick ratio and current ratio. These tools reveal the hidden rules in the financial statements, reflecting the relationship between the numbers that can quickly reveal the the corporate solvency of many side, but each ratio has its own focus, merely reflects the corporate solvency a side surface. Therefore, it is not based solely on the individual analysis tools on the solvency of the enterprise to jump to conclusions.
From the overall situation, the sample's asset-liability ratio was significantly higher than that of all A shares, which is 1.8 to 2.3 times. Liquidity, quick ratio is only 60% to 80%. This shows that the samples of the company's assets to support capacity and cash payments of claims, the ability to cope with adversity are weaker than all the A shares. And asset-liability ratio is generally less than 75% in order to explain the corporate balance properly, can be seen by calculating the sample companies for three consecutive years, the average asset-liability ratio is more than 99%, which can be concluded, that attributable to shareholders of paragraph negatively correlated with the listed company's solvency.
Enterprises there are many other factors more important than twelve ratio analysis, do not blinders. Together, these ratios are a useful tool, but only a deep understanding of the characteristics of enterprises and business background correct use of in order to play its due role. And these analytical tools are directly obtained from the balance sheet to the data, the balance is a static report, according to the calculated current ratio, asset-liability ratio indicators are static properties, and does not consider the cash flow solvency, so it should be combined with other indicators for analysis. (3) Big Shareholders shall the company's operational capabilities
Trading is reflected by a relevant indicator of the capital turnover rate of production and operation efficiency in the use of the enterprise funds, it indicates that the operation and management of the enterprise management personnel, the use of funds. Production operating cash flow rate, implying that the use of corporate funds the better, the higher the efficiency, the stronger the viability of the enterprise management personnel.
There are three main financial indicators reflect the ability of business operations: Accounts receivable turnover, inventory turnover and asset turnover.
Analysis we can see, these three financial indicators are significantly downward trend, which had people with major shareholders control problems linked from S * ST aspect of operating capacity.
In addition, from the overall situation, the sample company's accounts receivable turnover ratio of less than 7% of all A shares, which indicates that the problems of the Big Shareholders.
Largest shareholder funds of the Company, damage the operating capability of listed companies, and also damage the interests of small shareholders, major shareholders occupy more interest is the interests of the minority shareholders loss. Once listed company bankruptcy and liquidation, the victims of the minority shareholders will be the most serious.

(4) Big Shareholders cash flow from operating activities
Buffett's investment philosophy that cash to determine the value of the business, this is because the enterprise can be used for the production and management turnover, not net profit, but actually have cash. Only accurately reflect the net cash flow of the enterprise, in order to provide the correct information for enterprise business decision-making, therefore, the Western business community will be cash flow statement known as the business results of the polygraph. A business if there is no corresponding cash flows for the protection of funds strand breaks, will not be able to carry out normal business activities and may even cause deterioration of the financial position, facing the risk of failure. Since 2005, funding strand breaks become the most popular one of the terms of China's capital market drying up in the Delong, Zhuo Jing Department of Kogi, soutec, Kelon to Zeng market dumbfounded.
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