A Study On Listed Company's Corporate Governance And Protection Of The Rights And Interests Of Minor Investors

The core thought of corporate governance had been embodied in"The Wealth of Nations"by Adam Smith, and the public of"The Modern Corporation and Private Property"by Berle and Means had started research on corporate governance. However, real upsurge of research on corporate governance began with appearance of classical paper《Theory of Firm: Managerial Behavior, Agency Costs and Ownership Structure》by Jensen and Meckling in 1976。After that, Theory circle began to research deeply on"conflicts between shareholders and managements"and put forward many valuable theories about corporate governance. However, little research focused eyes on the relationship between Controlling Shareholders and Middle-small Shareholders. In 1990s later period, some economists such as LLSV began to pay attention to this problem and research on it. This spurred development of research on the relationship between Controlling Shareholders and Middle-small Shareholders and made it out of agent theory frame, as a result, it widened the research field of corporate governance theory.At present, our researches are still at the starting stage in this field compared with other countries. So, it is necessary for us to probe into corporate governance and protection of Middle-small Investors combined the background that our economy has begun to switch to a market economy.Through absorbing research achievement related this problem from home and abroad, this thesis researches on corporate governance and protection of Middle-small Investors deeply combined features of Chinese securities business. The author tries to get some achievement in this field and provides some beneficial references for health development of Chinese securities business through the research.This thesis is divided into six parts; here are corresponding contents and conclusions:In the first part, through reviewing the fundamental research on theory of corporate governance and the related background, the thesis opens out the reason that theory circle pay persistent attention to corporate governance: that is the benefits of investors especially Middle-small Investors lack effective protection. And then it makes summarization on Agent Theory, Stakeholder Theory, Modern H—Keeper Theory and other correlative literature in this foundation. This thesis narrates correlative literature of corporate governance about protection of investors in detail which will form the base of this thesis and also provide new achievements in this field for other scholars. In the second part, the thesis probes into organization form,features of enterprise and arguments on corporation goal in theory circle through analysis on enterprise'evolution way. It holds opinion that enterprise goal should manifest maximization of shareholders'value. The thesis probes into interest conflicts between Controlling Shareholders and Middle-small Investors and then analyzes aftereffects of conflicts through a theoretic model. Research on this part makes clear that Right of Co-Benefits of Shareholder and Right of Self-benefits of Shareholder should be main contents of protection of the rights and interests of Middle-small Investors; Agent relationship between Controlling Shareholders and Middle-small Shareholders results in interest conflicts between them; Interest conflicts include conflicts on selection of board of directors; conflicts on distribution of dividend and interest conflicts during mergers and acquisitions. All this conflicts will reduce Tobin's Q and result in inefficiency in investment decision-making. It will also lead to inefficiency of corporation scale and transformation of controlling power.In the third part, through looking back to system background of Chinese securities business, the thesis pays special attention to analysis on stockholder's rights structure and controlling power structure; Inspects the status quo of legal protection for Middle-small Investors; probes into display form that Controlling Shareholders trench on interests of Middle-small Investors and institutional roots that the interests of Middle-small Investors has been injured; and then makes theoretic analysis on it by using a model.Research on this part makes clear that: Firstly, with the development of economic system transformation, Chinese securities business began to emerge and grow. It is one kind of compulsory system vicissitude under government leadership.Because of historical limitation, the central authorities located securities business as server for the reform of state-owned enterprise during the developmental process of securities business and this overemphasized its financing function, neglected the its resources disposition function. All this problems brought serious aftereffects: such as malformation of stockholder's rights structure of listed company in China,inefficiency in corporate governance and intellection on rights and interests of Middle-small Investors. Secondly, Chinese government implemented reform of non-tradable shares whose purpose was reducing the proportion of state shares and legal person's shares in later 2005. However, the proportion of state shares and legal person's shares were still high, it was higher than proportion of tradable share which was unable to be against with concentrated state shares and legal person's shares. Thirdly, China had established legal protection system for Middle-small Investors which was based《The Securities Law of the People's Republic of China》and《Company Law of the People's Republic of China》and other administrative rules and departmental regulations. Fourthly, Controlling Shareholders often trenched on interests of Middle-small Investors through"security fraud"and"connected transaction". Sometimes they impinged on interests of Middle-small Investors by using"Dividend distribution Policy"because of natural flaw in stake structure of Chinese listed company. Fifthly, there were many institutional roots that the interests of Middle-small Investors had been injured in Chinese listed company, such as: The government excessively administrative intervention which twisted market functioning mechanism; absence in mechanism of coming to the market and out of the market for listed company; imperfect in legal system construction and so on. As a result, investment value of companies'was not high and it was difficult to develop healthily for Chinese securities business.In the fourth part, the thesis probes into the internal relation between corporate governance and protection of investors and analyzes the reasons that interests of Middle-small Investors had been injured by using a theoretic model, and then the thesis makes research on relation between corporate governance efficiency and protection of investors. Research on this part makes clear that: firstly, the better that the Law protects investors, the less that Controlling Shareholders shift company's profit and the higher that the corporate governance efficiency is and vice versa. Secondly, the higher proportion of rights and interests in cash flow that Controlling Shareholders hold the less that they trench on interests of Minority Shareholders. Thirdly, all listed companies choose the lowest efficient governance strategy combination because of information asymmetry and this is the reason that listed companies have low efficient governance. Fourthly, all companies will get benefit from efficiency and improve their conditions if the law protects investors compulsorily.In the fifth part, the thesis makes demonstration research on violation of rights and interests of Middle-small Investors by controlling shareholders based on above theoretical analysis. Research on this part makes clear that: Firstly, there are Controlling Shareholders in most of Chinese listed companies, and sometimes Controlling Shareholders are the chairmen of the board in many companies. This companies are higher in connected sales,connected purchasing and connected sponsion but lower in outstanding achievement than other companies whose chairmen of the board are not undertaken by Controlling Shareholders. This illustrates that Controlling Shareholders maybe utilize their controlling power to trench on interests of Minority Shareholders and shift profits of companies. Secondly, The main methods that Controlling Shareholders trench on interests of Minority Shareholders are capital engrossmen, connected sales,connected purchasing and connected sponsion.Thirdly, investor protection index defined by us has positive correlation with outstanding achievement of company, and this illustrates LLSV'viewpoint from microcosmic lay: the better that investors are protected by companies, the less that Controlling Shareholders shift profits of companies, the higher that governance efficiency is. Fourthly, our demonstration research indicates that there are vicious melon-cutting in listed companies under special stockholder's rights structure in China. And this indicates that Controlling Shareholders have chances to trench on interests of shareholders especially Minority Shareholders and snatch profits of companies through dividend policy.In the sixth part, the thesis makes summarizable research on corporate governance and protection of Middle-small Investors, puts forward some suggests protecting rights and interests of Middle-small Investors, such as: to optimize stockholder's rights structure and corporate governance; to perfect market supervising and managing system; to perfect related protection system for rights and interests of Middle-small Investors.