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On the impact of ownership concentration on corporate performance

Author: WeiQinĦĦHeYongXi From: www.yourpaper.net Posted: 2009-04-13 05:55:54 Read:
[Paper Keywords] Ownership Concentration Performance

ownership concentration refers to all shareholders demonstrated by the equity stake due to the different number of indicators centralized or decentralized. Ownership concentration have an impact on corporate governance, thereby affecting corporate performance. In accordance with the percentage of how many of the largest shareholder, the shareholding structure of the type can be divided into three categories: equity is highly concentrated, the options highly fragmented and the relative concentration of equity. Different ownership concentration corporate performance of the degree of dispersion will produce different effects. This article tries different effects on corporate performance analysis of these three cases.

a high concentration of shareholding
Option highly concentrated, the general performance of the largest shareholder owns more than 50% of the total shares, the basic position of absolute control, a very small share of the other shareholders, the shareholding structure called the absolute control of. As the largest shareholder has a majority ownership of listed companies, so under normal circumstances, the shareholders will support all aspects of the development of listed companies, large returns to shareholders, shareholders because the company is doing a good job, good listing of active operations company, from this perspective, the major shareholders and the interests of listed companies is the same. The same time, major shareholders of listed companies absolute control of, is often easier management of listed companies supervision and motivation, which also have a positive impact on the development of listed companies.
But it is worth noting that the company's equity if the absolute control of a single largest shareholder, controlling shareholder may make the need for their own interests against the interests of minority shareholders, the behavior affect the performance of listed companies. Currently the largest shareholder through its holding position misappropriation of funds of listed companies in China's securities market phenomenon is very common, visible largest shareholder sometimes more for their own interests, the subsidiaries and their pieces. In addition, because there is no external market takeover pressure, the other shareholders only by "voting with their feet" to indirectly affect the company's management the equity highly concentrated shareholding structure of the general performance is very stable. "Dominance" more emphasis on the company's long-term development management and strategic decision-making, but such a stable shareholding structure is reflected in the state-owned enterprises, but it will be invested on behalf of state-owned assets are not in place, vague property rights, lack of effective constraints incentives, resulting in lower management level to improve the performance of listed companies actively.

, equity is highly fragmented
Equity is highly fragmented refers to the case of the largest shareholder's stake below 20%, closer to a considerable number of the number of shareholders, the role of the individual shareholders is very limited. Equity highly dispersed ownership structure to avoid the polarization of the behavioral characteristics of highly concentrated ownership structure shareholders, but also to avoid collusion between large shareholders and agents. Many theoretical studies that dispersed Share Ownership structure due to the height of the company's equity is dispersed therein at any time there is the potential threat of a hostile takeover, the operation of the management of the Company has formed a strong monitoring and incentives. U.S. listed companies on the main equity highly fragmented shareholding structure of the external generate a lot of pressure on the management of the Company to take over the market, to encourage them to strive to improve corporate performance.
From another perspective, in the case of equity highly fragmented, the general sense of the separation of control and ownership has more fully, this time, the position of chairman or general manager in the corporate governance structure becomes more prominent. Their company's information to understand more fully, and thus their views easily affect minority shareholders who do not have the opportunity to participate in company decision-making, information asymmetry, and supervising the company's operations to pay the costs, shareholders tend to ignore the management supervision, "free rider" motivation, which seriously affected the supervision of the management of the Company, thus affecting the company's performance. Grossman and Hart (1980) study proved the equity highly fragmented conditions, the single shareholder of the lack of oversight of company management, and actively participate in corporate governance and drive growth in value of the company's incentive, because they derive income is far less than they supervise The company's costs, at the same time in the same conditions as other conditions, the company's shareholding structure is more dispersed, the lower the effective level of supervision of the principal agent, the more likely have an adverse effect on corporate performance.

equity relative concentration of
options relative concentration of the proportion of the largest shareholder in the range of 20% to 50%, shareholding structure, also called relative Holdings. The class options more concentrated, but the concentration is not too high, and generally there are a number of appropriate checks and balances between the majority shareholder. Largest shareholder number of shares owned, the power and ability to spot problems in the company operating and other shareholders also have some stake in the supervision of power and the balance of power in the behavior of management and major shareholders of listed companies, will not like small shareholders "free rider" motivation. In addition, the relative concentration of equity control rights of the controlling shareholder is relatively clear, when the company in the face of changes in the market, the managers investment decisions, the controlling shareholder was quick to react to change the company's business strategy, as well as removal of the managers.
Relative to the high concentration of shareholding ownership structure, the relative concentration of equity control rights of the controlling shareholder will have to face pressure from the external market mergers and acquisitions, corporate performance continued to decline, the largest shareholder may be internal and external pressure forced exit, equity relative concentrate may be the most conducive to replace a shareholding structure of the managers in the company operating the adverse circumstances, is conducive to the role of corporate governance, and more effective in promoting managers to act in accordance with the principle of maximizing the interests of shareholders to realize the value of the company. technology.
But the equity interest in the relative concentration also has its drawbacks, each shareholder in the equity position, the first few of the major shareholding proportion is relatively close to the members of the Board on behalf of the interests of different shareholders that the directors had no absolute decision-making power, major decisions and operations management may be differences, and sometimes difficult to form a coherent and effective solutions, prone to passing phenomenon. Although the mechanism of checks and balances between the shareholders can play a role in the decision-making differences may lead to missing an opportunity to have a negative impact on corporate performance.
In summary, the equity highly centralized, highly fragmented equity, equity is relatively concentrated ownership structure has its own advantages and disadvantages, the shareholding structure of the degree of impact on corporate performance is not the same. From the structure of the foreign listed companies, ownership concentration as an important part of the structure of listed companies, the evolution of a long-term process, during the different countries, due to the history, culture and values, as well as the stock market and economic development the respective different path, forming a diversification of ownership structure in the world. Large number of empirical results of the analysis show that the established ownership structure and environment of a country's history, economic structure, adapt the law, there is no superior or inferior to blindly emphasis on equity should be centralized or dispersed are one-sided the.
[1] Liu Zhiyuan Mao Shuzhen: ownership concentration of listed companies in China influencing factors Securities Market Herald, 2007 10.
[2] Liu Bin Wu Yaling: concentration of ownership, investor protection and the quality of information disclosure ", Journal of Shanxi University of Finance and Economics, 2007 10.
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