Research on separated development of virtual and real economy : evidences from listed companies in China during 2006–2013

WEN Chunhui1,2 REN Guoliang3

(1.School of Finance, Shanghai University of Finance and Economics, Shanghai, China 200433)
(2.College of Economics, Hunan Agricultural University, Changsha, China 410128)
(3.Research Institute of China United Insurance Holding Co. Ltd., Beijing, China 100032)

【Abstract】Based on a two-stage dynamic game model of ultimate controlling shareholders, mid- and small-cap shareholders and management, this paper analyzes the different economic effects the degree of separation of two rights (ownership and control (management) right) caused by pyramidal ownership structure has on two types of agent cost and corporate values, exploring from microscopic perspective the mechanism of separated development of virtual economy and real economy caused by the ultimate control of listed companies. This paper undertakes empirical tests using the panel data of listed companies in China during 2006–2013. The research results show: the degree of separation of separation of two rights has an inhibitory effect on the private benefit of management, a promotive effect on the private benefit of control and an erosive effect on corporate value; because of the differences the ultimate controllers of the listed companies have of the two agent costs and separation of two rights under pyramidal ownership structure, the phenomenon of a higher agent cost level of companies controlled by virtual ultimate controllers than those controlled by real ultimate controllers occurs, and the degree of separation of two rights caused by the pyramidal ownership structure of virtual ultimate controllers leads to a higher inhibitory effect on the private benefit of management, a higher promotive effect of the private benefit of control and a higher erosive effect of corporate value than those of the listed companies controlled by real ultimate controllers. In addition, based on the perspective of division of work of listed companies’ ultimate control, the paper explores the reasons for the separated development of virtual economy and real economy in China.

【Keywords】 virtual economy; real economy; pyramidal shareholding; private benefit of control right; separation of two rights;


【Funds】 the Youth Project of National Social Sciences Fund Youth Project (13CJY008) the General Project of Human Province Social Sciences (15YBA206)

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(Translated by LAN yuanqin)


    [1]. ①Here, α measures the marginal earnings of participants grabbing private benefit of control. One can also regard the value added of utility of insider’s private benefit grabbing as α. [^Back]


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This Article


CN: 11-3536/F

Vol , No. 12, Pages 115-129

December 2015


Article Outline


  • 1 Introduction
  • 2 Microscopic mechanism of the separated development of virtual and real economies
  • 3 Theoretical analysis and hypothesis proposal
  • 4 Empirical research design
  • 5 Empirical results and analysis
  • 6 Further discussions
  • 7 Major conclusion
  • Footnote