Research On Triple Principal-agent Relationship Of Large Shareholders In Family Firm ——Based On The Control Point Of View

Corporate governance literature has been focused on the traditional agency problem between shareholders of highly dispersed equity and managers for a long time. Recently some researchers show that ownership in public firms is highly concentrated instead dispersed in most countries of the world, in addition to one of the few countries. Research on our country’s large shareholders is fruitful because of the widespread "dominant" problem in our public firms. Family firms are important organizational form in Chinese firms. Large shareholders problem of family firms is different from that of state-owned firms. What seems to matter is family control. Further study on family firms’ large shareholders problem not only contributes to corporate governance theory and practice, but also has important practical significance in promoting family firms’ development and improving family firms’ value.This paper studied family firm large shareholders, investigated family large shareholders’ governance role. There are three kinds of agency relationship in family firm that are relationship between family large shareholder and manager, relationship between family large shareholder and other large shareholders, and relationship between large shareholders and minority shareholders. We explored all these there agency relationship. In research on the relationship between family large shareholder and manager, we highlighted the function of control allocation and analyzed the efficiency of control allocation between family large shareholder and manager. When studied the agency relationship between family large shareholder and other large shareholder we analyzed influence of the second large shareholder’s identity on firm value and investigated control characteristic of family firm. When studied the agency relationship between family large shareholder and minority shareholders we analyzed the method that family large shareholder encroaching minority shareholders as well as the influence of legal environment on family large shareholder.This paper proceeds as follows:Section 1 is the introduction. First it is the theory background and significance. Second it is the research method and construction of this paper. Third it is the innovational point and some main concept.Section 2 is the literature review and theoretical principle. First, it introduces the literature of definition, development and governance role of family firms. Then, it introduces researches on large shareholders which involved large shareholders’ production, characteristic, governance role, financial activity and method encroaching minority shareholders et al. Finally, it introduces two theoretical principles of this paper which is incomplete contract theory and agent-principal theory, and builts a theoretic ananlysis framework about family firms’three agent-principal relationship of large shareholders based on incomplete contract theory and agent-principal theory.Section 3 is Research on model of family forms’ authority transmitting. Based on Aghion-Bolton model we study the control allocation between manager and family large shareholders. In our model we consider two new factors which are learning cost and searching cost. We think a feasible way for family firm to transmit their authority is to generalize the family firm. Family firms keep the ultimate control to dismiss or intervene to managers. It can guarantee family shareholders’ majority of seats in the bored, at the same time transmit family construction, relation schema and way of doing things to non-family teams. Finally, it can generalize family trust to non-family team.Section 4 is analysis of family control, legal environment and large shareholders’ tunneling.lt analyzes if the corporate role of large shareholder of public family firm is propping or tunneling. Family large shareholders’ tunneling is through earning, dividend policy and related party transactions. It inspect the correlation between family large shareholders’ tunneling and legal environment with empirical method.Section 5 is research on identity of family large shareholder, large shareholders’ relationship and firm value. In this section we examine the influence of the second large shareholder to firm value with cross section data of 629 public firms in China. It shows that identity of the second large shareholder can influence firm value and the influence regulated by control executive of family firm. We also find that the influence will be more significant when other large shareholders are more competitive.Section 6 is research on influence of large shareholders’control characteristic on family firm value. In this section, it inspect indicators’influence on firm value, which are control of largest shareholder, pyramid structure, control of second large shareholder, competitive of second large shareholder, other large shareholders’right to summon bored and et al. It finds that if second large shareholder is family or personal, control of largest shareholder and pyramid structure have negative relationship with firm value. It also finds that if second large shareholder is institutional investor, control of second large shareholder and other large shareholders’ right to summon bored have positive relationship with firm value, competitive of second large shareholder has negative relationship with firm value.Section 7 is research conclusion and limitation. In this section, it summarizes research conclusion and limitation, and gives some policy suggestion about how to perfect family firms’corporate govenance.