Research On Board Structure Model At The Presence Of Large Shareholders

In a more effective and more mature market economy, Especially in British and American where the ownership are more dispersed, Board of Trustees is recognized as an important internal corporate governance mechanism, and is increasingly becoming the core of corporate governance. Along with the development of principal-agent theory and the contract theory, especially since Hermalin and Weisbach's paper which named"Endogenously Chosen Boards of Directors and Their Monitoring of the CEO", published in 1998, foreign scholars have done a lot of studies on the operation model of the Board of Trustees, which aimed at the more mature market and more dispersed ownership. And now this area has become a hot field in micro-finance research. To explain and find the internal mechanism of the formation of the Board of Trustees, and the relevance between the board structure and performance of the company, a lot of studies have been done on different capital markets and from different angles. These studies mainly focus on the direction of the Board of Managers, the intrinsic link between optimal structure of the Board of Trustees and the trends of the Board governance, etc., which greatly promote the perfection and development of theoretical model on Board of Trustees.The ownership concentration of China's listed companies is relatively high, and existence of large shareholders is a universal phenomenon, large shareholders often use their high voting rights of shareholders to control the General Assembly, and therefore control the composition and structure of its board, so companies'CEOs are often the wills of large shareholders, meanwhile the composition of corporate boards also to a large extent controlled by large shareholders. Therefore, it is necessary to study board structure model and its operation mechanism of China's listed companies from a perspective of major shareholder. Compared to the huge number of empirical studied on the Board of Trustees, the theoretical model is still very small, which provides a broad space for this study.As a starting point, the study gives an in-depth analysis of the system and background of the Board of Trustees. Firstly, this study uses a model which based on the seize on small shareholders of large shareholders to depict Board structure of the listed company when there is a large share holder, and uses the data of listed companies from 1999 to 2005 in China to empirically examine and value the result of the model. Then, this study continues to expand the original model assumptions, on the basis of the single largest shareholder we introduce a number of large shareholders, and then the study uses the overall data and data separated by policy zone to empirically examine the result of the model. How the structure of the Board affects the performance of the company, especially how the proportion of independent directors affects company performance? The conclusions of the study are not coincident. It is mainly due to the study on the endogeneity of company's board structure is not enough, and therefore many conclusions are not reliable. Lastly, In order to get a reliable conclusion in this area, the study compares four econometric approaches to study the performance of the system of independent directors, especially when the endogenous variables are considered.In this paper, after a lot of theoretical model derive work and empirical studies, the main findings and conclusions include: (1) When there is a single large shareholder, for the purpose of invading the value of the company, the large shareholder will use some ways to control the Board of Trustees, so as to their actions can pass the oversight of the board smoothly. These ways mainly include: According with the increase of the proportion of shareholders, which the proportion of outside directors appointed by the large shareholder increases, meanwhile, the proportion of internal directors also increase, however, the proportion of independent directors dose not affected -- in light of China's policies, it means that the large shareholder trend to suppress the proportion of independent directors to the of the bottom line prescribed by the policy. (2) When there are a number of large shareholders, the composition of the board is the result of the trial of the major shareholders, the Empirical result Reveals: the proportion of outside directors appointed by the first large shareholder increases by the increase of the first shareholder proportion, and decreases by the increase of the second shareholder proportion; So do the proportion of outside directors; And the proportion of independent directors increases by the increase of the second shareholder proportion; When the first shareholder and the second shareholder both are state-owned, the proportion of outside directors appointed by the first large shareholder is higher, and the proportion of outside directors is higher, but the proportion of independent directors is lower. (3) After I eliminate the endogenous variable with instrument variables and simultaneous equations measurement methods, I find the proportion of independent directors does not have a significant impact to the company's performance.The study makes a model framework to study of structure of the Board of Trustees under the existing of large shareholders of listed companies, studies the structure of Board from a view of the existing of large shareholders, and theoretically explains the degree of large shareholder control on board structure, which has some theoretical significance in enriching corporate governance theory. This study discusses the effect of monitoring and colluding relationship between large shareholders on the structure of the company's board, and uses multiple methods to controls the endogeneity of variables to contrastingly study the performance of the operation of the broad, and uses the data of China's listed companies to empirically examines the result of the model, compensates the blank for the research area, which has certain practical significance in enhancing the Board's independence, improving the efficiency of supervision, protecting the interests of small shareholders from large shareholders, and promoting the standardization of the capital market.