Abstract

This paper primarily used statistical methods to establish financial early-warning models that made it possible to predict in advance the probability of a company experiencing financial distress, and raised corporate performance. In the empirical analysis, there may be the first study that attempted to use financial ratios and non-financial ratios such as ratio of director and supervisor ownership stakes after pledging of shares <5, 5 - 25, >25% as variables to analyze cross-holding groups. The study used the K-S, M-U tests and Logit regressions model. When the ratio was less than 5%, the main indicators showing the impact of dispersion of equity ownership upon corporate performance were the following factors, financial structure, solvency, and operating performance indicators. At 5 - 25%, the significant variables were ROS, ROE, and EPS influenced the corporate performance, while ownership stake of directors and supervisors was concentrating, ownership stake of executive officers would increase. To increase ownership stake of institutions, and avoid switch of CPAs and establishing independent directors and supervisors, may strengthen corporate governance. Beyond 25%, establishing independent directors and supervisors may strengthen corporate governance. At 5 - 25%, ownership stake of directors and supervisors, and ownership stake of executive officers were concentrating, establishing independent directors and supervisors may be lower to the likelihood of financial distress, and raised the corporate performance. Empirical test of a managerial implication on non-financial variable acted as an observation corporate performance. It can provide a reference for stockholders to observe corporate performance, and then to decide investment strategies. Corporate ownership and management changed, the mean contribution of this paper was that switch of CPAs and establishing independent directors and supervisors may be lower the likelihood of financial distress. This paper would be useful to researchers or practitioners who were focusing on management ownership and corporate governance implementation.

Key words: Corporate ownership, corporate governance, corporate performance, financial risk management.