1. Advantages: It is conducive to power balance and democratic decision-making.
2. Disadvantages: It is easy to slow down the company's response speed, and it is likely to miss opportunities and reduce work efficiency.
Decentralization means that a large number of major shareholders hold a large number of shares, and they hold fewer shares.
scatter
The largest shareholder holds 5%
The second largest shareholder holds 2%
The third largest shareholder holds shares 1%
The fourth largest shareholder holds 0.5%
Focus (attention)
The largest shareholder holds 5 1%
The second largest shareholder holds 20%
The third largest shareholder holds shares 10%
The fourth largest shareholder holds 5%
merits and demerits
Decentralization of equity:
1. Advantages: It is conducive to power balance and democratic decision-making.
2. Disadvantages: It is easy to slow down the company's response speed, and it is likely to miss opportunities and reduce work efficiency.
Equity concentration refers to the concentration of shares controlled by major shareholders (Shleifer &; Vishny, 1986), (Burkart, Gromband Panunzi, 1998), that is to say, the major shareholder either serves as the manager himself or closely supervises the management team to control the company's policies, while other shareholders lack the ability and motivation to oppose the decision-making of the controlling shareholder.
When the ownership of a company is centralized and there are controlling shareholders, the ownership structure has two opposite effects on corporate governance, namely, the benefit synergy effect and the embezzlement effect (Shleifer and Vishny, 1986).
On the one hand, a certain degree of equity concentration makes the controlling shareholder have greater right to claim income, which makes the major shareholder have enough motivation to collect information and effectively supervise the management, thus avoiding the problem of "hitchhiking" of shareholders in the case of decentralized equity; At the same time, relatively centralized control rights also ensure that major shareholders can exert sufficient influence on the company's decision-making behavior.
Shriver and Vishnu (1986) believe that even in a closed market, it is still necessary for large shareholders to exist, because large shareholders not only alleviate the free-rider problem caused by highly dispersed equity, but also facilitate the smooth progress of M&A activities. When the management of the company has the behavior of establishing a manager empire at the expense of shareholders' interests, the major shareholders can replace it by fighting for agency rights or taking over, thus increasing the value of the company. This is the so-called benefit synergy effect.
On the other hand, the emergence of major shareholders has also brought costs to enterprises. Because the interests of major shareholders are often inconsistent with other shareholders and stakeholders of the company, there is a serious agency conflict between them. In the absence of external control, major shareholders may sacrifice the interests of other shareholders to pursue their own interests, which is the so-called embezzlement effect.