Corporate Governance Based On The Split Times After Equity Interests Of Minority Shareholders Protection Perspective

Research on corporate governance remains hot issue since 1980s. Initially the agency problem between shareholders and managers is of main concern. With the waves of comparative study on corporate governance and research on corporate governance in emerging markets the agency problem between controlling shareholders and minority shareholders is attached much importance. And this kind of agency problem is the right focus of this paper.With the advent of post share rights splitting era in China's capital market changes have taken place in respect of the equity structures of listed companies such as the decline of ownership concentration and percentage of shares owned by the largest shareholders and the rise of percentage of shares held by other large shareholders and institutional investors. As the liquidity of all shares becomes true we expect that the interest-convergence platform based on share price between controlling shareholders and minority shareholders will be formed and irrational behavior of listed companies will be restricted because of the threat imposed by the market for corporate control. At the same time the revision of Corporate Law and Security Law and accounting standards means the enhancement of government regulation, which provides support for the function of market power. It is believed that in post share rights splitting era the agency costs between controlling shareholders and minority shareholders shall be lower than that in share rights splitting background. So the author chooses to study the corporate governance in China from the viewpoint of protection of minority shareholders' interests in post share rights splitting era.On the basis of historical literature and classic theories we make clear the definition of minority shareholders and their income and expenses, on the other hand we choose the cash dividend, related party transactions and disclosure as the indication variables of protection of minority shareholders' interests that lay the foundation of our empirical study.Some results are obtained from the empirical study on cash dividend. After the reform of share rights splitting the trend of reduction of cash dividends of listed companies is laid out, as is mainly caused by those companies which employed high cash dividend before the reform of share rights splitting. In my opinion this results from the decline of illiquid agency costs between original illiquid controlling shareholders and liquid minority shareholders. And the study on market reaction to cash dividends and the relationship between cash dividend and growth opportunity provide further support for the conclusion. However, our study on equity structure variables and board of director structure variables which influence cash dividends before and after the reform of share rights splitting demonstrates that the cash dividends of China's listed companies do not possess the characteristics of the instrument which can reduce agency costs between controlling shareholders and minority shareholders in liquid capital markets yet.Some results are obtained from the empirical study on related party transactions. It is found that as result of the decline of cash dividend level and the loss of benefits of trapping money controlling shareholders are inclined to obtain private benefits of control through more related party transactions and resort to related party transactions that tunnel listed companies apparently without obscuring. Correspondingly the negative effect of related party transactions on Tobin's Q becomes stronger after the reform of share rights splitting. As far as related party transactions are concerned the decline of ownership concentration and percentage of shares owned by the largest shareholders as result of the reform of share rights splitting imposes little effect on the power of controlling shareholders and institutional investors have not made the most of their abilities yet. However, after the reform of share rights splitting the binding force of other large shareholders is reinforced and the monitoring role of independent directors is about to function as result of lifting the rules in respect of independent directors from former CSRC rule level to present Corporate Law level.Some results are obtained from the empirical study on disclosure. After the reform of share rights splitting the compulsory disclosure level of listed companies is improved as result of new edition of CSRC disclosure rules, and as leads to the improvement of the voluntary disclosure level. As for the reform of share rights splitting listed companies with better performance are not motivated to signal through increasing voluntary disclosure. At present the improvement of compulsory disclosure level has more effect on Tobin's Q than improvement of voluntary disclosure level. After the reform of share rights splitting institutional investors begin to play significant positive role on disclosure comprehensiveness, and the negative relationship between independent director ratio and disclosure level begin to show statistical significance.Conclusions are drawn from the empirical study on these indication variables. With the advent of post share rights splitting era irrational behaviors of listed companies are restricted to such an extent that expropriation of minority shareholders is mitigated. However, because of the original equity structures of China's listed companies the market power resulting from the reform of share rights splitting has not posed threat on the influence and control by controlling shareholders. And the new rules and regulations cannot function well without strong enforcement. Our analysis on governance between controlling shareholders and minority shareholders shows that the game equilibrium between them has not been achieved.On such basis some suggestions are put forward as follows: compulsory disclosure level shall be further improved; support of institutional investors shall be encouraged; the regulation level in respect of key corporate governance variable shall be raised; the enforcement of rules shall be enhanced; percentage of shares owned by the largest shareholders shall be reduced to moderate degree and so on. In the end the prospect for future research is advanced.