An analysis on divergence degree of control rights and cash flow rights in the private listed companies in China

Substantial researches suggest that the divergence of control rights and cash flow rights of listed companies is the main reason leading to controlling shareholders' expropriation of minority shareholders. Based on the collected sample of 246 private listed firms traded in the Shenzhen and Shanghai Stock Exchanges, the paper has examined the divergence degree of control rights and cash flow rights held by ultimate controlling shareholders after tracing the control chains to identify the ultimate controlling shareholders of the listed companies in China, and has analyzed the way of divergence of ownership and control. The result proves that among the listed private companies, where there is high concentration of control by ultimate controlling shareholders, there exists obvious divergence of control rights and cash flow rights; and participation in management and pyramids schemes are the main ways of diverging control from ownership.