رقابت بازار محصول، ساختار نهایی کنترل و معاملات گروه مرتبط

Previous studies have shown that product market competition has an important effect on corporate strategies and internal governance mechanisms. Using a sample of China’s listed firms from 2004 to 2009, we explore the relationship between product market competition and normal related party transactions and find a significant positive relationship. In addition, we investigate the substitutive effect of product market competition and the cash flow rights owned by ultimate controlling shareholders on the extent of normal related party transactions. In particular, our results suggest a positive relationship between the ultimate controlling shareholders’ cash flow rights and normal related party transactions that is strongest in noncompetitive industries and weakens as product market competition increases.

Product market competition plays a pivotal role in influencing corporate strategies and internal governance mechanisms. Shleifer and Vishny (1997) argue that “product market competition is probably the most powerful force towards economic efficiency in the world.” Competition increases the probability that firms with high costs will go bankrupt (Schmidt, 1997) and fear of bankruptcy is a strong incentive for managers to exert the effort required to remain competitive (Hart, 1983). Further analysis shows that product market competition is a substitute for internal governance that reduces agency costs (Karuna, 2010 and Giroud and Mueller, 2011). The role of related party transactions (RPTs) within business groups is widely discussed in the literature. Efficiency-enhancing theory suggests that imperfect emerging markets increase transaction costs that can be largely reduced through RPTs between the members of a business group ( Khanna and Palepu, 1997 and Khanna and Palepu, 2000). In contrast, agency theory argues that RPTs can be used in the expropriation of listed companies. In particular, business groups could use abnormal RPTs to tunnel resources from listed firms ( Liu et al., 2008 and Chang and Hong, 2000). Following these studies, particularly the methodology of Jian and Wong (2010), we classify RPTs as normal or abnormal. Normal RPTs can decrease the transaction costs of listed firms, whereas abnormal RPTs can be used as a way of tunneling or propping business groups’ specific purposes. According to the efficiency-enhancing view, normal RPTs help firms to reduce transaction costs and increase value. This implies that product market competition leads to a greater need for normal RPTs to reduce transaction costs. Given that controlling shareholders with substantially more cash flow rights have strong incentives to maximize firm profits through normal RPTs (Shleifer and Vishny, 1986), we expect to observe a substitution effect between product market competition and controlling shareholders’ cash flow rights. Our empirical evidence is consistent with these predictions. Using a sample of China’s A-share listed firms from 2004 to 2009, we show that product market competition has a significant positive effect on normal RPTs. That is, firms from more competitive industries tend to reduce transaction costs by increasing normal RPTs. We also find that product market competition and ultimate controlling shareholder’s cash flow rights have a substitutive effect on normal RPTs. Specifically, we note a positive relationship between ultimate controlling shareholders’ cash flow rights and normal RPTs. Moreover, this relationship is strongest in noncompetitive industries and weakens as product market competition increases. Our study contributes to the literature in the following ways. First, it adds to the rapidly expanding work on the effects of product market competition. For example, Aghion et al. (2006) investigate the relationship between product market competition and vertical integration. Our results suggest that product market competition also affects firms’ transactions, i.e. firms from more competitive industries are more likely to have normal RPTs that reduce transaction costs. Second, our study has an important implication for research on ultimate controlling shareholders. Previous studies have mainly investigated the tunneling of ultimate controlling shareholders based on agency theory, ignoring the alignment of interests between controlling shareholders and other investors. Our results provide evidence that the cash flow rights of ultimate controlling shareholders have a positive effect on firms. Finally, we shed light on the relationship between external and internal corporate governance. Previous studies have shown that product market competition can either complement or substitute for some internal corporate governance mechanisms (Karuna, 2010; Giroud and Mueller, 2011). Our findings support the substitution effect by showing that the influence of ownership structure on the occurrence of normal RPTs is weakened by product market competitiveness. The remainder of this paper is organized as follows. Section 2 develops the hypotheses and discusses the related empirical predictions. Section 3 discusses methodological and empirical issues. Section 4 presents our empirical results and Section 5 concludes the paper.

Based on a sample of A-share Chinese listed firms from 2004 to 2009, we examine the effect of product market competition and the ultimate controlling shareholder’s cash flow rights on normal RPTs. Product market competition is not only pivotal in influencing corporate strategies, but can also be a substitute for internal governance mechanisms. We adopt Jian and Wong’s (2010) approach to estimate normal RPTs. Our empirical evidence shows that product market competition has a significant positive effect on normal RPTs. This implies that firms in competitive industries can increase normal RPTs to reduce transaction costs. Further investigation shows that product market competition and the ultimate controlling shareholder’s cash flow rights have an interaction effect on normal RPTs, with the ultimate controlling shareholder’s cash flow rights in noncompetitive industries being more likely to improve normal RPTs. This provides evidence that product market competition can act as a substitute for the ultimate controlling shareholder’s cash flow rights on normal RPTs.