Analysis Of The Eroding Of Minority Shareholders' Rights And Interests

In emerging capital markets, the protection of minority shareholders is becoming an increasingly serious problem. This problem is broadly referred to as the expropriation of the minority shareholders. This study explores this issue in an emerging capital market, namely The People's Republic of China. A lack of confidence in a capital market, such as China's, can have serious consequences as it may hinder investment and economic growth. The data to be examined are taken from a range of sources, which detail the shareholding structures in China's A share-listed companies. This identifies individuals and institutions that do not have, via their shareholding, controlling rights in these companies. Given the structure of these shareholdings, the notion of shareholders' interest and rights are examined. In particular, interests are defined in terms of the financial returns to shareholders while rights are seen as a shareholder's capacity to participate in management decisions,including to get complete and true information, as given by the law of corporation governance and government legislation. What the author needs to declare is that she uses the related terms of law, which are generally approbatory, as the substitutions for both rights and interets in the dissertation. Given that data pertaining to the financial and management decisions of corporations are detailed in publicly available sources, it is possible to examine the hypothesis that minority shareholders rights are expropriated. The extent of expropriation, if established, can be compared to similar data from other national economies. Statistical and other analyses of the data do indeed demonstrate that minority shareholders rights are expropriated in China and that their level is greater than in a selection of comparable capital markets by both the studies of the author herself and other literature. Questions regarding the reasons for minority shareholder expropriation are then examined. In particular the negative effects of expropriation are outlined and suggestions relating to the protection and enhancement of minority shareholders' interests and rights are put forward.