Shareholding structure, private benefit of control and incentive intensity: from the perspective of enterprise strategic behaviour

Abstract

This paper studies theoretically and empirically the relationship among shareholding structure, the private benefit of control and incentive intensity. By integrating the principal-agent theory and the market competition theory into the three-stage dynamic game model, we built the dual principal-agent relationship including both 'shareholder-manager' and 'controlling shareholders-small and medium shareholders'. Empirically, the panel data of 1971 listed enterprises in China from the year 2007 to 2014 are analysed in order to justify the theoretical results by using twoway fixed effect model, dynamic panel model, and threshold regression model. It is shown that for enterprise managers, the higher their ability level and risk aversion, the stronger their incentive intensity will be. However, for shareholders, the private benefit of control and the incentive intensity show a non-linear relationship with the change of ownership concentration.

Reviewing the relationship between organizational performance, dynamic capabilities and strategic behavior

“…Research is mainly based on two theories: the principal agent theory and the theory of market competition. The former emphasizes that managers are motivated by shareholders or owners to reduce production costs and optimize production processes; the latter highlights the impact of market competition outside a company on the strategic behavior of production, research and development (Zhao et al 2021 ; Ball 2021 ).…”

Does green credit policy promote corporate green innovation? Evidence from China

“…Generally, companies with highly liquid assets tend to invest more in enterprise R&D and produce more innovative results (Pham et al 2018 ); (7) The number of employees, which is the logarithm of the number of employees in the business ( LnEmployee ); (8) Inst , which is indicated by the shareholding ratio of institutional investors; (9) Largest , indicated by the shareholding ratio of the largest shareholder. If Largest is very high, it indicates that the decision-making ability is too centralized, which usually reduces the willingness to innovate because of private interests of control (Zhao et al 2021 ). (10) Age.…”

The impact of “Mass Entrepreneurship and Innovation” policy on SMEs’ innovation: Using quasi‐natural experiments

“…Capital density (cap) is used to measure the gaps in different SMEs’ innovation ability. In addition, if the shareholding ratio of an SME's the top 10 shareholders (top10) is high, it indicates that decision‐making power is too concentrated, which often reduces innovation willingness due to overarching private interests of control (Zhao et al., 2021b). Variables’ descriptions are summarized in Table 1.…”