Research On The Controlling Shareholder’s Agency Problems Of Family Listed Firms From The Perspective Of Social Capital

As a social science research frontier concept, social capital emphasizes the influence on the economic behavior by the informal institutional of historical and cultural factors such as trust, norms, network. Because of the social factors of the "family", the governance of the family enterprises is also influenced by the institutional factors such as trust, network and so on. Because of this common between the social capital and the family enterprise, the research on family enterprises from the social capital theory is becoming a fresh perspective. Some scholars have done some research on the organization characteristics and management behavior of family businesses from the perspective of social capital, but these research is lack of attention on the controlling shareholder s governance from the perspective of social capital theory. Because the controlling shareholders is the controlling family parental authority as well as the leader of the family business corporate governance, their behavior are also affected by the social capital factors such as the personal networks of social relationship, trust model.Therefore, this article attempts to analyze the problem of the controlling shareholders agency, problem, take the social capital factors into the analysis framework of the controlling shareholder agency problem, try to find out the inner mechanism of the agency problem more comprehensively.This article follows the research train as “building up a theory framework-theoretical analysis-the empirical test", takes "the family controlling shareholders’ social capital of the family listed companies and the controlling shareholder agency problems" as the main line, try to explore and study the following three questions: the basic problems of social capital analysis of the listed family companies of the controlling shareholders, the influence of social capital on the controlling shareholders’ agent behavior,and social capital’s influence on the governance of controlling shareholder agency problem.From the Perspective of Social Capital theory, on the basis of a fully understand of the controlling shareholders agency problem, corporate social capital theory and social capital theory the view of family business research, we put up a clear concept of the family companies’ social capital, and build up a framework of the controlling shareholders social capital of the listed family companies. Then, under the framework of social capital theory,we analyze the mechanism of family listed companies controlling shareholders agency problem. Next, we take the social capital factors intoconsideration,and expand the analysis of the mathematical model of LLSV model,using the mathematical model to study the relationship between the social capital and the encroach of the controlling shareholders of family listed companies.Finally, using a observational data including 372 listed family companies from 2007 to 2012, by the way of the balanced panel data regression analysis method, we give an empirical analysis on the relationship between the equity structure, social capital, the controlling shareholder benefit expropriation and the effectiveness of corporate governance.Through the research,our conclusions are as following:First, because of the "family" embedded, family firms’ social capital is showed out as a dual network, with the characteristics of family network and the characteristics of enterprise network. Because of the difference of family network range and scope of enterprise network, the social capital of family enterprises is not only showed out some positive external effects but also showed some negative external effects. This kind of negative external effects lead to the controlling shareholders encroaching the interests of small and medium shareholders in the process of their investment and using of the social capital.Second, by the influence of the system transition economic characteristics and the traditional "family culture", the controlling shareholders control of the listed company including pyramid "stock control" and network "social capital control ".Under the influence of social capital control, the controlling shareholders’ benefit expropriation ability and motivation is strengthened, and the implementation of benefit expropriation is also gradually becoming the recessive deprivation, the benefit expropriation models are diversification, and the behavior and identity of the controlling shareholders is more hidden,and the controlling shareholders agency problem is more serious.Third, through the mathematical model, we found out the following conclusions:the proportion of cash flow right of controlling shareholders is negative with the controlling shareholders’ encroach; The bigger of controlling shareholders’ actual control of the listed companies,the controlling shareholders encroach is more serious;The equity balances, legal regulatory and other corporate governance mechanisms can limit the benefit expropriation behavior of the controlling shareholders in certain extent, but the controlling shareholders’ social capital can weaken the corporate governance mechanisms, and thus affect the interests of the controlling shareholders’ encroach.Fourth,through the empirical analysis,we found that the "stock control" and "social capital control" do exist in the family listed companies in China, and the "equity control" is significantly negative with the "social capital control". It is show that the controlling shareholders of the family listed companies in China weaken their“equity control” through the way of purchasing and stock reducing, they will strengthen their “social capital control” at the same time, so as to achieve a comprehensive ultimate control of the family listed companies. For family listed companies in our country, the controlling shareholders’ ultimate cash flow rights mainly showed interests coordination effect, however, the controlling shareholders’ social capital will weaken the interests of the ultimate cash flow rights synergies.At last, the empirical results show that, the legal regulation, equity balances, and executives shareholding can effectively restrain the benefit expropriation of the controlling shareholders of the family listed companies, but the external audit and the independent directors failed to exert governance functions. Moreover, different levels of social capital will produce different effects on the effectiveness of the corporate governance. Further study showed that,when the legal regulatory environment is better,the board of directors and external audit will also be able to restrain the controlling shareholders’ encroach on the listed companies significantly.Therefore,strengthening the construction of legal system, perfecting the corporate governance environment is good to solving the controlling shareholders agency problem of the family listed companies in China.The main contribution of this paper is as follows: on the basis of the "familial" embedded characteristics of Chinese family businesses, this article take the social capital into the the study of the controlling shareholder agency problems by the family listed companies, try to give a system research on the internal mechanism of the controlling shareholders agency problem of the family listed companies; This article’s innovation is putting forward a theory model on the research of the controlling shareholder agency problem from the social capital perspective, building up a index of the controlling shareholders’ social capital, and firstly using the large sample data to empire the relationship between the social capital, the controlling shareholders’ encroach and the effectiveness of corporate governance on the controlling shareholders agency problems. Through all the study, this article gives out some of the original research conclusions.