ABSTRACT
Under the pyramid shareholding structure, the departure of the control right and the cash flow
right of the ultimate controlling shareholder has enhanced the desire of the ultimate controlling
shareholders of the listed companies to occupy, weighing the pros and cons, when the ultimate
controlling shareholders think that the income of the encroach behavior is much more than the
cost, he will encroach the listed company. The ultimate controlling shareholders’ embezzlement
infringes the interests of small and medium-sized shareholders seriously, at the same time, it
brings serious negative effects on the long-term development of the listed companies, it even produces
negative effect on the healthy development of capital market in China, so the study on the
encroach behavior of the ultimate controlling shareholders is extremely essential. Based on the
theory of psychological ownership, this paper conducts an in-depth study on the psychological
motivation of the encroach behavior of the ultimate controlling shareholder. The study found that:
under the pyramid shareholding structure, the control right of the ultimate controlling shareholder
and the cash flow right depart, consequently, the control right of the ultimate controlling
shareholders of the listed companies is greater than the cash flow right. The control right will influence
the individual’s psychological ownership right by three ways of information, assets and influence,
and the ultimate controlling shareholder himself will produce psychological ownership
via efficiency, self-recognition, having space and social exchange. The psychological ownership
will lead to the expected earnings of ultimate controlling shareholders in the psychological level,
but the real return of the ultimate controlling shareholder is determined by the cash flow right
aka the corresponding proportion of share bonus, in the case of the separation of two rights, the
expected income and actual income of the ultimate controlling shareholder will be misplaced, in
order to compensate the income gap, the ultimate controlling shareholder will take encroach behavior
to get more profit.