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Absence of ultimate controller and investment efficiency: Evidence from China

PloS one, 2023-06, Vol.18 (6), p.e0287615-e0287615 [Peer Reviewed Journal]

Copyright: © 2023 Qin et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. ;COPYRIGHT 2023 Public Library of Science ;2023 Qin et al. This is an open access article distributed under the terms of the Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ (the “License”), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;2023 Qin et al 2023 Qin et al ;ISSN: 1932-6203 ;EISSN: 1932-6203 ;DOI: 10.1371/journal.pone.0287615 ;PMID: 37352229

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  • Title:
    Absence of ultimate controller and investment efficiency: Evidence from China
  • Author: Qin, Jidong ; Liu, Jiawei ; Deng, Dan
  • Follert, Florian
  • Subjects: Adverse selection ; Annual reports ; Asian People ; Business ; Business enterprises ; Capital markets ; China ; Conflict of interests (Agency) ; Conflicts of interest ; Controllers ; Corporate governance ; Decision making ; Economic aspects ; Efficiency ; Equity ; Financing ; Humans ; Hypotheses ; Investments ; Investor relations ; Management ; Management reports ; Managers ; Monitoring ; Moral hazard ; People and Places ; Research and Analysis Methods ; Social Sciences ; Stockholders
  • Is Part Of: PloS one, 2023-06, Vol.18 (6), p.e0287615-e0287615
  • Description: In modern enterprises with a separation of powers, the ultimate controller can effectively influence the implementation of corporate strategy and operational management efficiency, as well as improve corporate governance by monitoring and limiting the management entrenchment effect within enterprises. Based on the information pertaining to ultimate controllers disclosed by enterprises in their annual reports, this study empirically tested whether the absence of the ultimate controller impacts investment efficiency using the data of Chinese A-share listed companies from 2007 to 2020. It was found that the investment efficiency of enterprises without ultimate controllers is relatively lower than those with ultimate controllers. This is reflected in the insufficient investment of enterprises without an ultimate controller. Moreover, the effect is more significant when the financial environment, internal governance environment, and external governance environment of firms are worse. The mechanism analysis demonstrated that the absence of an ultimate controller causes a more severe insider agency problem and a significantly higher degree of financing constraints, which leads to underinvestment and reduces investment efficiency of firms. The economic consequence test also found that the inefficient investment caused by the absence of ultimate controllers would damage the future value of enterprises, but would increase managers' compensation. Overall, this study suggests that ultimate controllers are an important part of a firm's internal governance, especially for monitoring management behavior and resolving agency conflicts.
  • Publisher: United States: Public Library of Science
  • Language: English
  • Identifier: ISSN: 1932-6203
    EISSN: 1932-6203
    DOI: 10.1371/journal.pone.0287615
    PMID: 37352229
  • Source: Public Library of Science (PLoS) Journals Open Access
    Geneva Foundation Free Medical Journals at publisher websites
    AUTh Library subscriptions: ProQuest Central
    MEDLINE
    Directory of Open Access Journals
    NCBI PubMed Central（免费）
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