1、1Study on the Relationship among Equity Division， Equity Concentration， and Corporate ValueAbstract. In this paper， by taking the market competition of product and the nature of the largest shareholder as two constraint conditions， a grouping empirical test is made on the relationship between equity
2、 concentration and corporate value in different situation. The results of the study show that the influence of equity concentration on corporate value is state-dependent； equity concentration is uncorrelated with corporate value if the nature of the largest shareholder is domestic legal person share
3、， but is significantly correlated with corporate value if the nature of the largest shareholder is state-owned share in the industries of low product market concentration. Key words： Equity Division； Equity Concentration； the Market Competition of Product； Corporate Value 1.Introduction In May 2005，
4、 equity division reform was officially launched by China Securities Regulatory Commission. In this reform， the restrictions on non-tradable shares and the full-2circulation of shares were cancelled. Therefore， the relationship between equity concentration and corporate value can be more accurately i
5、nvestigated in the study of this paper. The data of the listed companies having completing the equity division reform is used in this empirical analysis， but what relationship is between equity concentration and corporate value？ In this paper， by taking the market competition of product and the natu
6、re of the largest shareholder as two constraint conditions and using the data （in 2008-2010） of the listed companies having completing the equity division reform by 31 December 2007， the relationship between equity concentration and corporate value in the different market competition of product and
7、the different nature of the largest shareholder is empirically tested. 2.Measurement and Differentiation of the Market Competition of Product 2.1 Measurement of the Market Competition of Product Nickell （1996） proposed that the profit margin of the primary business of enterprise could be regarded as
8、 the “monopoly rent“ of enterprise to a certain extent. The higher monopoly rent means that the cost for other enterprises to 3enter the market will be higher， and a new entrant has greater difficulties to enter the market and thus its market competition is lower. In this paper， the market competiti
9、on of product is measured using the profit margin of the primary business. In this paper， according to the average profit margin of the primary business of an industry， industries are classified into the industries of high product market competition and the industries of low product market competiti
10、on； the market competition of product is measured using the average profit margin of the primary business of each industry in 2009-2010. 2.2 Differentiation of the Market Competition of Product According to CSRC classification standards， the A-share listed companies at Shanghai Stock Exchange can be
11、 classified into 13 industries. In studying the market competitions of industries， the finally rest industries include the following18 industries except finance and insurance industry， comprehensive industry， wood and furniture industry and other manufacturing industry： （1） agriculture， forestry， an
12、imal husbandry and fishery； （2） mining； （3） food and beverage； （4） textile， clothing， and fur； （5） papermaking and printing； （6） oil， chemistry， and 4plastics； （7） electronics； （8） metal and nonmetal； （9） machinery， equipment， and instrument； （10） medicine， and biology； （11） production and supply in
13、dustry of electric power， gas and water； （12） construction； （13） transportation， and warehousing； （14） information technology industry； （15） wholesale and retail trade； （16） real estate industry； （17） social services； （18） communication and cultural industry. In this paper， the A-share listed compan
14、ies at Shanghai Stock Exchange within above 18 industries are used as samples. First， according to the profit margin of the primary business of each listed company in 2009-2010 （provided by SINA Finance and Economics Channel） ， the profit margin of the primary business of each industry in 2009-2010
15、is calculated with Excel2003. Second， the average profit margin of the primary business of each industry is calculated： the average profit margin of the primary business of each industry=（the profit margin of the primary business of each industry in 2009+ the profit margin of the primary business of
16、 each industry in 2010）/2. And the statistical results are shown in table 1. Table 1： The average profit margin of the primary business of each industry 5In this paper， 3 industries with the highest average profit margin of the primary business are chosen as the group of low product market competiti
17、on； 5 industries with the lowest average profit margin of the primary business are chosen as the group of high product market competition. Table 1： The average profit margin of the primary business of each industry 3. Design of the Study 3.1 Sample Selection and Data Source The A-share listed compan
18、ies at Shanghai Stock Exchange within 18 industries are chosen as study samples in this paper. Considering the studied macro-background was equity division reform， the data in 2008-2010 is used， and therefore the following removals are made： （1） the companies listed after 31 December 2006 are remove
19、d； （2） the listed companies having not completed equity division reform after 31 December 2007 are removed； （3） the listed companies， in which the nature of the largest shareholder is non-state-owned share or domestic legal persons share， are removed. Finally， the number of the rest sample companies
20、 is 295： the first group includes 69 companies； the second group includes 32 companies； the third group includes 141 companies； the fourth 6group includes 53 companies. 3.2 Design of the Variables 3.2.1 Explained Variables Corporate value is expressed with Tobins Q value （Q=market value of corporate
21、 asset/replacement cost of corporate asset）. And the market value of corporate asset is equal to the sum of equity market value and net-debt market value. The replacement cost of corporate asset is replaced with the book value of final total asset. The data sources from CSMAR database. 3.2.2 Explana
22、tory Variables In this paper， equity concentration is measured with the ratio （CR1） of the share held by the largest shareholder. 3.2.3 Control Variables There are many factors producing an effect on corporate value. To make the model more indicative， two control variables are introduced in this pap
23、er： （1） corporate scale （Lnasset） ， which is used for defining the natural log value of the book value of the final total asset； （2） Debt-to-assets ratio （DAR） ， which is equal to the ratio between the total debt and the total asset. 4. Empirical Analysis 4.1 Descriptive Statistics Analysis 7Accordi
24、ng to table 2 and seen from mean value， the CR1 of the largest shareholders of the total samples， the first group， the third group and the fourth group is reduced slightly along with the growth of year； the CR1 of the largest shareholders of the first group is significantly higher than that of the s
25、econd group， and the CR1 of the largest shareholders of the third group is also significantly higher than that of the fourth group； the CR1 of the largest shareholders of the first group is significantly higher than that of the third group， but this difference does not exist between the second group
26、 and the fourth group. With regard to Tobins Q value and seen from the mean value， the Q of the first group is significantly lower than that of the second group， and the Q of the third group is also significantly lower than the that of the fourth group； the Q of the first group is higher than that o
27、f the third group， and the Q of the second group is significantly higher than that of the fourth group. With the growth of year， the change trends of the CR1 of the largest shareholders of all groups and the Tobins Q value of all groups are compared， respectively. Therefore， it can be found that the
28、re is a nonlinear relationship between equity 8concentration and corporate value in the total samples， the first group， the third group and the fourth group in terms of the mean value； there is a positive correlation between equity concentration and corporate value in the second group. Table 2： Desc
29、riptive statistics on equity concentration and corporate value 4.2 Regression Analysis First of all， to test whether there is a linear relationship between equity concentration and corporate value （the tool is SPSS16.0） ， a model as follows is established. （1） From table 3， it can be seen that the r
30、elationship between equity concentration and corporate value in the first group is significant correlation （the significance level is 0.1） ， but such a relationship does not exist in the total samples， the second group， the third group， and the fourth group， suggesting the increase of the CR1 of the
31、 largest shareholder can be significantly helpful for the improvement of corporate value only if the industry is with a low product market competition and the nature of the largest shareholder is state-owned share. Table 3： Linear regression results 9Second， to test whether there is a secondary nonl
32、inear relationship between equity concentration and corporate value （the tool is SPSS16.0） ， a model as follows is established. （2） Table 4： Secondary nonlinear regression results From table 4， it can be seen that the secondary nonlinear regression between equity concentration and corporate value in
33、 the total samples and the four groups does not statistically pass the test of significance. Are there are other nonlinear relationships between equity concentration and corporate value？ In this paper， multiple nonlinear fitting analyses are made on equity concentration and corporate value through u
34、sing R-language statistical analysis software， and the results are as follows. （1） Only one significant model as follows exists if the data of the total samples is used in the multiple nonlinear fitting analyses. （3） In the above， the coefficient 1.922 and the coefficient 2.498 are significant at th
35、e significance of 0.05， and another two coefficients pass the test of the significance （0.001）. （2） Many significant models exist if the data of the 10first group is used in the multiple nonlinear fitting analyses， and the most significant one is as follows after a comparison. （4） In the above， the
36、coefficient 12.319 is significant at the significance of 0.001， and the coefficient 0.086 is significant at the significance of 0.05； the coefficient -1.066 passes the test of the significance （0.001） ， and the coefficient 0.809 passes the test of the significance （0.05）. This suggests that there is
37、 a significant index function relationship between equity concentration and corporate value in the first group. （3） There is no a proper curve fitting model in the second group， the third group and the fourth group. This suggests there is no a nonlinear relationship between equity concentration and
38、corporate value in the second group， the third group and the fourth group. 5. Conclusions and Suggestions for Policies Through linear regression analysis and non-linear regression analysis on the total samples and all groups， the following conclusion is drawn up. First， the result of the regression analysis using the total samples as data is misleading， and the relationship
