Research On Private Profits Gained By Big Shareholds During Transfer Of Stock Right Agreement In China's Listed Companies

In wake of the milestone reform of stock right divides in the Chinese capital market, the market of control power, which will optimize the resource distribution and help assess corporate value, should have been set up under this brand new circumstance of whole circulation. However, over the past few years, such market mechanism of control power has not yet been effectively established. According to data that WIND offers:on the Chinese market of control power in 2008, deals done by way of old stock right agreement transfer still amount to more than 55% of the total stock right trade in that year. Therefore, it is obvious that transfer of stock right is still the mainstream trade method on China's control power market. Aside from the arrangement limitations imposed by the supervision department on the sale of non-tradable shares, which prevent big shareholders from reducing stocks in a large scale in the secondary market, are there any other profound reasons that lead the big shareholders to keep their enthusiasm for the transfer of stock right agreement?On the basis of reviewing the latest research results in the field of market of control power, this paper refers to such basic theories as property right theory, agency's theory, effective market hypothesis theory, generally cites knowledge from study fields like management, economics, finance and investment. Studying both the inside and outside of the secondary market of the stock, this thesis will set up corresponding research model, including the model of big shareholders'private income at a premium outside the market, the financial model influencing big shareholders'private income, the structural model of stock right, and a benefit model inside the market which can add up to excessive income in the playground. And on the basis of building up research model, a series of hypothesis are put forward.This Research testifies the hypotheses put forward one by one through the use of OLS induction, non-parameter examination method and incidence analysis and many other kinds of measurement tools. After the research, it has been found that in the process of transferring stock rights agreement, the big shareholders can make use of the agreement premium outside the stock market and internal trade in the stock market, to seize private interests, which can be as much as about 35% of the private benefits of control. By analyzing financial status and stock structure, the two main factors influencing the shareholders'private income outside the stock market, also together with the use of OLS induction and non-parameter examination law, it also have been verified that a big shareholder obtains about 25.06% of his private interests outside the field; besides it is also possible for a big shareholders to grab around 8.94% of his private profits.With this research going further, this paper reaches the following important conclusions:Study conclusion one:Transfer of stock right agreement has become one of the important routes for the big shareholder from targeted companies to obtain the private income, and meanwhile, shrinks the control power that can be enjoyed by the minority stock holders. So the existence of transfer of stock right agreement is a detriment to the interests of minority share holders.Study conclusion two:The transfer of stock right agreement caused the purchasing part to bear a heavy financial burden. The high cost of the acquisition exactly explains the high acquisition failure rate of the purchasing firms.Study conclusion three:Financial performance should have become the source and foundation of the shared profits produced by control power, however, the existence of transfer of stock right agreement facilitates big shareholders'obtaining private interests. It is a must to strengthen the construction of the administration structure inside the company to restrict the big shareholder's private interests.Study conclusion four:The big shareholders of the company where small amount of transfer of stock right agreement can get private interests that outstrip that gained by big shareholders from companies where transfer of control power takes place. This is related to the fact that small amount of stock right transfer is difficult to be boycotted by the union of other big shareholders. And the big shareholders of government owned corporation are able to seize far more extra private interests than the shareholders of private corporations. So the reform and merge of the state-owned enterprise should be reinforced.Study conclusion five:the greater in proportion the stock transfer is, the more centralized the stock right is, and therefore the stock right checks will be more balanced and it will be more difficult to transfer the stock rights. And finally it will cost more for the shareholders to persuade the insiders of the company so as to actually transfer the stock rights. When the transfer plan finally works out, this shareholder will ask for more from the new comers to compensate what he or she has spent on the realization of the transfer. In this sense, an improved structure of stock right in a corporation can help to curb private benefits of control of the big shareholders.Study conclusion six:The big shareholders avail themselves of the easy access to the inside information and conspire with other investment agencies to obtain capital profit with upward stock price and got the private income on the secondary market before the day of trade announcement of the stock rights. The better the stock right management structure is, the more integrated and powerful the internal control system of a firm is, and the more likely that big shareholders'conspiracy of obtaining private interests through inside trade can be prevented.The innovative points of this paper lie in:(1) From the perspectives of financial situation and stock structure, this paper analyzes how the big shareholders'gain of private interests can be affected with reference to actual cases. The relevant factors which influence the private income of control power have already been studied by some scholars, but seldom have scholars systematically and comprehensively researched the problems concerning the private income gains of big shareholders in the transfer of stock right agreement from the two dimensions of financial status and structure of stock right. Also regarding big shareholders'utilization of internal information to gain private interests inside the market during the stock right transfer, existent studies are all qualitative with scant factual illustration. In comparison, this dissertation cites lots of actual cases about shareholders'internal swap by resorting to the techniques of incidence analysis.(2)A research and analysis model of big shareholders'private income from both the inside and the outside of the market has been set up. It is in fact an initial attempt to consider the share holders'personal interests gained from both the inside and outside of the market and estimate out the rough figure representing the private income of the big shareholders can get in the course of transfer by studying the real cases.(3)Innovatively taking into consideration of the transfer of stock right agreement, this thesis provides some new insight into the causes of two problems:the high failure rates of corporate merger and the invalidity of China's market of control power. To put it into details, one of the reasons leading to the failed merger is that the transfer of stock rights agreement, which makes it facile for the big shareholders of the targeted company to snatch huge amount of private profits, which throws a rather heavy financial burden on the merging side at the very beginning. And the second reason is that the existence of the transfer of the stock right agreement stunts the pressure mechanism of the market of control power from operating smoothly.