Analysis of the Relationship between Ultimate Controlling Shareholders and Private Enterprises＇ Business Performance

In China, major shareholders of private listed enterprise could control its production and operation by virtue of few resources which makes it possible for ultimate controlling shareholders to expropriate minority shareholders＇ rights and interests.In this paper, we studied the relationship between ultimate controlling shareholders and business performance of private enterprises based on the theory of ultimate controlling shareholders and made relevant conclusions and recommendations.

Audit pricing and nature of controlling shareholders:Evidence from France

This study examines whether auditors are employed as a monitoring mechanism to mitigate agency problems arising from different types of controlling shareholders. In a context of concentrated ownership and poor investor protection, controlling shareholders can easily expropriate wealth from minority shareholders and profit from private benefits of control. However, this agency conflict has been rarely studied, as the most commonly assumed agency conflict occurs between managers and shareholders. Using an audit fee model derived from , we study the impact of the nature of controlling shareholders on audit fees in French listed firms. Our results show: (1) a negative relationship between audit fees and government shareholdings; (2) a positive relationship between audit fees and institutional shareholdings; and (3) no relationship between audit fees and family shareholdings. These results illustrate the mixed effects of the nature of ownership on audit fees.

Does overcapacity prompt controlling shareholders to play a propping role for listed companies?

A major risk currently facing the Chinese economy is overcapacity,which affects the efficiency of social resource allocation(Xi et al.,2017;Huang et al.,2019).When a company is in crisis,the internal capital market often plays a propping role.This study approached this issue from the perspective of the controlling shareholder and examined whether controlling shareholders provide financial support to enterprises in industries with excess capacity.According to the data for China’s A-share listed companies from 2007 to2019,companies in industries with excess capacity received more financial support from controlling shareholders compared with those in non-overcapacity industries.Analysis of the mechanism revealed that state-owned enterprises and companies with relatively poor financial status received more financial support from controlling shareholders.This study also examined the economic consequences of such support and found that it is conducive to enhancing enterprise value.This study enriches the literature on overcapacity and internal capital markets by demonstrating that internal capital markets play a propping role for companies facing industry-level crises.This finding has both theoretical value and practical implications related to supply-side reform and capacity reduction.

The Empirical Research on Family Ownership and Earning Quality in China

Corporate governance takes an important role in affecting the quality of accounting information. Since the ownership structure determines the method and the level of the corporate governance and the right of control, supervision, and the benefit, it can decide the quality of information and affect the earning quality. This paper examines if the ownership concentration affects the earning quality in family-owned companies in China. Using the data of 298 publicly-traded corporations in China, this paper finds that the controlling shareholders are associated with low earning quality and that the separation of control rights and cash flow rights is negatively associated with the earning quality of family ownership.

Product market competition,ultimate controlling structure and related party transactions

Previous studies have shown that product market competition has an important effect on corporate strategies and internal governance mechanisms. Using a sample of China's listed firms from 2004 to 2009, we explore the relationship between product market competition and normal related party transactions and find a significant positive relationship. In addition, we investigate the substitutive effect of product market competition and the cash flow rights owned by ultimate controlling shareholders on the extent of normal related party transactions. In particular, our results suggest a positive relationship between the ultimate controlling shareholders' cash flow rights and normal related party transactions that is strongest in noncompetitive industries and weakens as product market competition increases.

From State to State: Quasi-privatization and Firm Performance

This paper uses a sample of Chinese listed companies whose controlling shareholders have changed from government agencies to state-owned enterprises＇ （SOEs）, to examine whether reducing government intervention while maintaining government＇s ultimate control could improve firm performance. The results show that the overall performance of these firms improves after the transfer of their controlling shareholders, due to improvements in both operating and non-operating performance. When we separate all samples into solely SOEs and other SOEs based on the controlling shareholder, we find that operating performance improved significantly in the solely SOE group, whereas non-operating performance improved significantly in the SOE group. In addition, we identify sources of performance improvement from two perspectives： corporate governance and related party transactions. The results imply that the Chinese Government should continue to decentralize control and, at the same time, continue to monitor firm operating efficiency.