Analysis On Effect Of Institution On Protection Of Minority Shareholders’ Right

In the contcentrated share right countries, the proxy problem between the minority shareholders and controlling shareholders is very serious and the principle of“Capital of majority”puts minority shareholders into adverse circumstance. Controlling shareholders expriorate minority shareholders greatly and unversely. It comes to an unquestionable fact that the right of minority shareholders is violated. As the major investors minority shareholders bear the major financing responsibility. So damaged right of minority shareholders will affect the financing function of secutity market and development of national economy. It has been a common consensus that instituation can protects right of minority shareholders not to be violated.Based on the instituation, this study solves the questions as follows: (1) How does instiution including law and reputation affect protection of minority shareholder’right? (2)What on earth does the situation of protection of minority shareholder’right in China and does instiution in China protect minority shareholder’right ? (3) How to strengthen institution protection of minority shareholder’right against the minority shareholder’s characteristic? Firstly, analyzes how instiution affect protection behaviors of minority shareholders’right, then analyzes supply situation of institution following the two thought of law of formal instituation and reputation of informal institution, puts forward to three hypotheses and testing them:(1)Building the action model of law on protection level of minority shareholders’right and proposes hypothesis from law in paper and law in action (3) building the action model of reputaition on protection level of minority shareholders’right and proposes hypothesis from different point of reputaition.Taking the Listed Companies as research object, this study uses STATA10.0 statistic software to deal with data, and comprehensively employs descriptive analysis, principal ananlysis, student t test, panel random effect model to test these hypotheses. The result shows: (1) The protection level of minority shareholder’right in China is very low. Dividend gains is so low that capital gains becomes the main resource of minority shareholder’s earning while minority shareholdes have to beargreat risk of stock market’s shock. (2) Law has the positive action on the protection of minority shareholder’right (3) Reputaition has the positive action on the protection of minority shareholders’right. (4) Although law and reputation have affected minority shareholders’right positively, contrast to the low right level of minority shareholders law and reputation are not enough.It is necessary to complete law in paper , strengthen law in action and exert reputation .The study has made some works and attribution as follows:Firstly, existing research to analyze the institution’s action is based on controlling shareholders .But protection of minority shareholder’right is not only from the restraint of instituation on controlling shareholders’behavior but also from the recentive of instituation on minority shareholders’behavior. When big sharholders emerges inevitably, strengthening the active behavior of minority shareholders becomes another way to protect minority shareholders’right. The study begins from the behavior of minority shareholders, analyzes how instiution including law and reputation affect protection of minority shareholders’right and proposes the instiutation should be developed into decreasing the cost and externality of minority shareholders and strengthening active behaviors of minority shareholdersSecondly, analyzes the supply of law protection on minority shareholders following law and reputation. Although the law institution is more perfect, law is still unadequate against numerous and disperse and small benefit and big cost of exerting right of right minority shareholders.Voting mechanism and relif mechanism are the more important content related to right protection of minority shareholders. Based on this, analyzes the cumulative voting instituation and derivative action instituation and points out the disadvantage of fair and efficiency against protection of minority shareholders using law and economy method. Uses repeated game theory to analyze the action of big shareholders on protection of minority shareholders’right and point out that the reputation mechanism has little affect because of the intervention of government’s reputation.Thirdly, analyzes empirically the effect in affect of the institutional protection of the minority shareholders in China.Using principal factor analysis to measure protection level of the minority shareholders from the point of the right of return on asset. Using panel random effect model and t test method to test law and reputation’s real influence on the right protection of the minority shareholders. Results show that law and reputation have positive affect on the right protection of the minority shareholders including cash dividend earning level and capital gains level .Contratry to the low dividend earning level and high capital gains risk, law and reputation at present are not enough.Forthly, how to decrease the cost of minority shareholder exerting right, the collective action is necessary choice considering the vulnerable groups characteristics of minority shareholders. Against cumulative voting instituation and derivative action instituation, analyzes the effect of voting right proxy solicitation instutation and shareholder class action instutation on the minority shareholders’protection and realization of fair and efficiency using law and economy methods. Then proposes to build the voting proxy solicitation institution and class action, and exert reputation mechanism and rebuild trust society to make up for the inadequate law building and weak law enforcing. Law and reputation together promote right protection of the minority shareholders.This study shows the real sitution of protection of minority shareholders’right and the action of institution on the protection of minority shareholders’right in China theoretically and empirically, therefore provides the basis for formulating the related instutation of protection of minority shareholders’right.