Font Size: a A A

Excess Control Right, Investor Legal Protection And Enterprise Performance

Posted on:2012-10-18Degree:DoctorType:Dissertation
Country:ChinaCandidate:W J QiFull Text:PDF
GTID:1116330335962299Subject:Business management
Abstract/Summary:PDF Full Text Request
Becoming a source of investment value in Chinese capital market and the most advantage group in China's economic system, listed companies have made outstanding contributions to the sustainable development of Chinese capital market and the national economy. However, there is more serious phenomenon of the ultimate controlling shareholders'control in most of Chinese listed companies. It is estimated that about 90% of Chinese listed companies are controlled by the ultimate controlling shareholders, most of whom possess excess control right over stockholders'meeting through the pyramid structure and over board of directors through selecting directors. Events like this happened frequently:the ultimate controlling shareholders abuse the excess control right, and infringe the interest of enterprise and the minority shareholders through fund embezzlement, insider trading and so on. These events bring great chanllenge to the sustainable growth of Chinese listed companies. In the meantime, in order to avoid being delisted, achieve IPO qualification and so on, the ultimate controlling shareholders also use their excess control right to inject high quality assets in the company and provide financial support for the companies which will benefit minority shareholders and enterprise. In this context, in order to protect the interest of minority investors and enterprises, Chinese government is improving the system of investor legal protection and strengthening law enforcement. However, in China, the level of investor legal protection is low as a whole and exists regional differences. Therefore, the understanding of the impact of excess control right on enterprise performance and the role of investor legal protection has become an important issue that must be solved during the development process of China's capital market and national economic. The global financial crisis since 2007 has increased the urgency to resolve this important issue.Through a review of the study on the effect of the ultimate controlling shareholder's control, this dissertation holds that excess control right is the essence of ultimate controlling shareholder's control, and in order to study the impact of excess control right on corporate performance and the moderating effect of investor legal protection, tunneling effect and propping effect should be considered synthetically. However, the impact of excess control right on corporate performance remains unclear when tunneling effect and propping effect are considered synthetically. Furthermore the moderating effect of the investor legal protection has not been well studied. These issues have become bottlenecks which limit the further development of the study on the effect of ultimate controlling shareholder's control.Integrating normative and empirical research approach, this dissertation attempts to study these issues systematically. The following four parts are the main work of this dissertation. Firstly, based on existed research achievements, the concept and dimension of both the excess control right and the investor legal protection were defined. In the absence of the proper measurement of excess control right over management and longitudinal data of private law enforcement, this dissertation only considered excess control right over stockholders'meeting and excess control right over board of directors, the level of national legislation, the level of national law enforcement and the level of local law enforcement. Secondly, considering tunneling effect and propping effect synthetically, the impact of excess control right on enterprise performance and the moderating effect of investor legal protection were explained systematically, and then 10 research hypotheses were proposed. Thirdly, the listed companies in manufacturing industry in China during the period of 2005-2009 were chosen as the research object.1800 samples were collected through a number of mean such as annual report and the CSMAR database of Shenzhen Guo Tai'an information technology Co., Ltd,, and more detailed and accurate data were accumulated. Finally, the research hypotheses were tested based on fixed effect model using Stata 11.0 software.Above research work, the following conclusions are drawn:Firstly, excess controls right over stockholders'meeting and over board of directors have inverted U-shaped impacts on enterprise performance. On one hand, along with the increase of excess control right over stockholders'meeting, enterprise performance improves with decreasing speed first, and then declines with increasing speed after the excess control right over stockholders'meeting reaching a certain point. On the other hand, along with the increase of excess control right over board of directors, enterprise performance improves with decreasing speed first, and then declines with increasing speed after the excess control right over board of directors reaching a certain point. These results suggest that in order to evaluate the effect of ultimate controlling shareholder's control scientifically, tunneling effect and propping effect should be considered synthetically, and excess control right should be chosen as the proxy variable of ultimate controlling shareholder's control.Secondly, excess controls right over stockholders'meeting and over board of directors have U-shaped impacts on net amount of fund embezzlement. On one hand, along with the increase of excess control right over stockholders'meeting, net amount of fund embezzlement declines with decreasing speed first, and then raises with increasing speed after the excess control right over stockholders'meeting reaching a certain point. On the other hand, along with the increase of excess control right over board of directors, net amount of fund embezzlement declines with decreasing speed first, and then raises with increasing speed after the excess control right over board of directors reaching a certain point. These results suggest that the impacts of excess control right over stockholders'meeting and over board of directors on enterprise performance are also reflected in the behavior lelvel.Thirdly, the level of national legislation and national law enforcement negatively moderate the inverted U-shaped impacts of excess control right over stockholders' meeting and over board of directors on enterprise performance significantly; the level of local law enforcement negatively moderates the above impacts to some extent. The higher the level of national legislation, the lower the inverted U-shaped impacts of excess control right over stockholders'meeting and over board of directors on enterprise performance. The higher the level of national law enforcement, the lower the inverted U-shaped impacts of excess control right over stockholders'meeting and over board of directors on enterprise performance. Along with the increase of the level of local law enforcement, the inverted U-shaped impact of excess control right over stockholders'meeting on enterprise performance is weakened significantly; the inverted U-shaped impact of excess control right over board of directors on enterprise performance is weakened insignificantly. It may be due to the measurement indicators of local law enforcement are incomplete. Another explanation may be that local law enforcement can not play a good role in the protection of investors in China. Overall, these results suggest that investor legal protection is a multidimensional concept, and can weaken the impact of excess control right on enterprise performance.Compared with previous studies, this dissertation contributes to the existing studies in the following ways:Firstly, based on considering tunneling effect and propping effect synthetically, the impacts of excess control right over stockholders'meeting and excess control right over board of directors on enterprise performance have been studied systematically, which promotes the study on the effect of the ultimate controlling shareholder's control from "isolated" to "integration". The control of ultimate controlling shareholder produces tunneling effect and propping effect both. Excess control right is the essence of ultimate controlling shareholder's control. Therefore, the evaluation of the effect of ultimate controlling shareholder's control, should consider tunneling effect and propping effect synthetically, and excess control right should be chosen as the proxy variable of ultimate controlling shareholder's control. However, almost all existing researches carry on studies from only one single perspective——tunneling effect or propping effect. Most of them select cash flow right, control right or enhancement mechanism of control right as the proxy variable of ultimate controlling shareholder's control. As a result, the logical relation among these researches is fuzzy. Considering tunneling effect and propping effect synthetically, this dissertation has studied the impacts of excess control right over stockholders'meeting and excess control right over board of directors on enterprise performance systematically. It helps researchers to perceive the effect of excess control right over stockholders'meeting and over board of directors on enterprise performance completely and also promotes the study on the effect of the ultimate controlling shareholder's control from "isolated" to "integration" in certain extent.Secondly, based on considering tunneling effect and propping effect synthetically, the effect of excess control right over stockholders' meeting and over board of directors on net amount of fund embezzlement have been further studied systematically, which promotes the ultimate controlling shareholder's control study from "result" to "behavior". According to corporate governance theory, the ultimate ownership structure affects enterprise performance through affecting the behavior of the ultimate controlling shareholder. However, most existing researches focus on the result level and give a little attention to the behavior level. Considering tunneling effect and propping effect synthetically, this dissertation has studied the impacts of excess control right over stockholders'meeting and over board of directors on net amount of fund embezzlement systematically. It provides empirical evidence for the impact of excess control right on enterprise performance and promotes the ultimate controlling shareholder's control study from "result" to "behavior".Thirdly, from three dimensions of investor legal protection (the level of national legislation, the level of national law enforcement and the level of local law enforcement), the negative moderating effect of investor legal protection on the inverted U-shaped impacts of excess control right over stockholders'meeting and over board of directors on enterprise performance has been studied, which promotes the investor legal protection research from "direct effect" to "moderating effect". Investor legal protection not only affects the behavior of ultimate controlling shareholder and its effects directly, but also plays a moderating role by weakening the impact of the ultimate ownership structure on the behavior of ultimate controlling shareholder and its effects. However, most existing researches focus on the direct effects, and are use data from developed countries and single dimension of investor legal protection. Currently, the moderating effect of investor legal protection on the impacts of excess control right over stockholders'meeting and excess control right over board of directors on enterprise performance is almost a "blind spot". Based on China's system of investor legal protection, this dissertation has clarified dimensions of investor legal protection, and then studied the negative moderating effect of investor legal protection on the inverted U-shaped impacts of excess control right over stockholders'meeting and over board of directors on enterprise performance. It provides empirical evidence from emerging economies for this field, and promotes the investor legal protection research from "direct effect" to "moderating effect".The research field of the effect of the ultimate controlling shareholder's control is still very young, and only a few relatively important issues were studied in the dissertation. Further research still calls for improvements from a number of different aspects. In future, the impact mechanism of excess control right on enterprise performance, the moderating effect of private law enforcement and so on, are all interesting topics that require in-depth study.
Keywords/Search Tags:Excess Control Right, Investor Legal Protection, Fund Embezzlement, Tunneling Effect, Propping Effect, Enterprise Performance
PDF Full Text Request
Related items