The Relationship between Ultimate Controlling Shareholders and Market Performance

• Main Authors: Jung-Yuan Shiu, 徐中原
• Other Authors: 林宜勉
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/51792032302403679611

碩士 === 國立中興大學 === 會計學研究所 === 94 === Due to the fact that domestic literature review mainly discussed the effects of ultimate controlling shareholders ownership structures, firms’ values, and quality of earnings, few studies have explored the effects of insufficient transparency of earnings caused by controlling shareholders’ entrenchment effects on market liquidity and market volatility. This research examines market performance and distinguish market performance into market liquidity and market volatility, therefore, in terms of the concept of ultimate controlling shareholders that distinguishes the corporate governance of ultimate controlling shareholders’ ownership structure and ultimate controlling shareholders board composition, this paper aims to explore whether or not the controlling shareholders’ possible solicited wealth entrenchment effects would undermine the quality of financial statements that further influence stock market liquidity and volatility. The evidences show that (1) The more control rights the ultimate controlling shareholders obtain, the higher the market liquidity is and the lower the market volatility is; the sharp divergence between cash-flow rights and control rights the ultimate controlling shareholders obtain, the lower the market liquidity is and the higher the market volatility is. (2) As for firms that are typically controlled by families or individuals, the market liquidity is lower but the market volatility is higher; as for firms that are typically controlled by group, the market liquidity is lower but the market volatility is higher. (3) When we also take into considerations the incentives of entrenchment effects, the higher proportion of the controlling shareholders’ director numbers are, the lower the market liquidity is. Also, the larger divergence between cash-flow rights and the number of the controlling shareholders’ directors, the market liquidity is lower but the market volatility is higher. Moreover, the higher the ratio of the Pledged Shares, the lower the market liquidity is but the higher the market volatility is; ultimate controlling shareholders’ participation in management lowers market liquidity but enlarge market volatility.