Allocation of Decision Rights in Business Groups——From the Perspective of Parent-subsidiary Governance Distance

Abstract

Extending the dichotomous logic of centralization of strategic and decentralization of operational rights in the M-form structuring,we decompose the decision into six subclasses,i.e.,strategy,investment,human resource,finance,budget and operation;And then we run a multivariate analysis of variance on the allocation of multi-class decision between the parent company and its directly affiliated units in the104 central enterprise groups.We find out:①In these large state-owned enterprise groups,the allocation pattern of decision take shapes,in which important sub-class are centralized while less important sub-class decentralized.②There are no significant differences in the allocation of the sub-class between three organizational structures,i.e.,functional,multi-business and holding structures;However,there are significant differences in the allocation of the sub-class between different parent-subsidiary governance distances,especially in the allocation of budget and financial rights.③The parent-subsidiary governance distance exerts a significant moderate effect on the relationship between organizational structure and the allocation of sub-class rights,especially in the allocation of financial and investment rights.These results suggest that large enterprise groups should improve their abilities of corporate governance to facilitate the alignment between the allocation of decision and organizational structure.