Economic effect of separation between cash flow rights and controlling rights of ultimate shareholders—Evidence from private-listed companies in China

Based on ultimate shareholder's views, five hypotheses were proposed. Using method of least squares, regression models were set up. Data of this research comes from private listed companies in Shanghai stock markets from 2004–2008. The paper examines the effects of ultimate shareholder's controlling rights, cash flow rights and the separation between them on corporate performance and capital structure. The paper aims to give some suggestions on interests protection of minority shareholders in China. Results show that: (1) Controlling rights are negatively related to corporate performance, and cash flow rights are positively related to it. The performance decreases with the separation degree of the two rights. (2) Controlling rights and cash flow rights are negatively related to the size of debt financing.