Empirical Research On The Relationship Between Controlling Shareholders’, Ultimate Controllers’ Behavior And Corporate Governance Efficiency

Since Berle and Means put forward the concept of corporate governance explicitly, it has beenpaid more and more attention to study on corporate governance theory and practice. With theestablishment of the stock market and the emergence of the listed companies on corporate governancein China，study on corporate governance is also gradually expand. In1990s, the emergence of theoutbreak of the Asian financial crisis and the events of Enron in2001， and a series ofworld-renowned corporate scandals, has sparked unprecedented attention on corporate governanceissues. In United States, OECD and other international organizations and some countries newcorporate governance norms have been issued. China Securities Regulatory Commission also issued anumber of corporate governance norms, and scholars carry out related research, corporate governancegains the attention of the community increasingly.In this paper, there is a brief review of the origins of corporate governance and the meaning ofcorporate governance firstly. On this basis, it surveys and comments the academic literatures on thecorporate governance efficiency and evaluation, the agency problem between large shareholders andminority shareholders, which is closely related to this study, as well as the status of corporategovernance research and the new progress now. Corporate governance research can be summarized infour aspects: the connotation of corporate governance research, the study of the theory of corporategovernance, corporate governance mechanism and corporate governance comparative research. Inrecent years, the new progress of corporate governance study includes the study of the corporategovernance efficiency and corporate governance evaluation, large shareholders and minorityshareholders proxy issues (i.e. Principal-Principal Agency), and research on behavioral corporategovernance. The corporate governance research have changed from the agency problem betweenshareholders and managers to the agency problem between large shareholders and minorityshareholders, these studies have made extensive research, but there are the following deficiencies:First, the study of the control mainly stay in the largest shareholder gains and the influence of largeshareholders on corporate performance levels; Second, the research is mainly limited to majorshareholders or controlling shareholders, but lack of ultimate control, controlling shareholder andultimate control behavior; Third, it is different to define corporate governance efficiency, and lack ofstrict theoretical definition, study on the influence of large shareholders behavior on corporategovernance efficiency is not deep enough. In this paper, it analyzes the controlling shareholders and ultimate controllers behaviorcharacteristics in China’s A-share listed companies, and studies the agency problem between largeshareholders and minority shareholders of listed companies, defines the corporate governanceefficiency and suggests its measuring index. On this basis, it focuses on the relationship between thecontrolling shareholder, ultimate controllers’ behavior, and corporate governance efficiency, then itproposes a theoretical model and conducts an empirical test. Also, it gives some suggestions toimprove corporate governance efficiency and effectiveness.This paper argues that the corporate governance efficiency is an institution efficiency,minimizing the governance cost of stakeholder, or maximizing the governance return is directmeasures of the corporate governance efficiency, and corporate performance, or the value of thecompany is indirect measures. The corporate governance efficiency has multiple characteristics. Thebehavior of controlling shareholders and ultimate controllers is the key factors that affect thecorporate governance efficiency, their behavior depends on the individual characteristics, own needsand environment. The corporate governance efficiency is a function of the controlling shareholders’and the ultimate controllers’ individual characteristics, the behavior and its environment. Pursuant tothis, in this paper, it founds an empirical analysis framework of the Environment-Behavior-Efficiency.It tests the hypothesis by using the expense ratio, Tobin’s Q, ROE, ROA and the number of violationsas measure indicators of the corporate governance efficiency. The empirical results show that thecorporate governance efficiency is impacted by the corporate governance environment and structure,the controlling shareholders’ and ultimate controller’ activities differently, but the relationshipbetween them is not static. This shows that the impact factors of corporate governance efficiency aremore complex, especially environmental factors not only factors involved. From the empiricalanalysis conclusion, the hypotheses proposed according to the theoretical analysis and related researchliteratures are not completely established. If the Corporate governance efficiency measure is different,the test results of hypothesis will be different. On the one hand, the results of this study furtherillustrate the indices of corporate governance efficiency are multifarious, the fundamental reason isthe complexity of the corporate governance efficiency; On the other hand, it also illustrates that therelationship between the corporate governance structure, the behavior of controlling shareholder andthe ultimate controller of the company, and the corporate governance efficiency is complexity. Thesimple linear model could not effectively illustrate the mechanism and the mechanism between them.In addition, due to the difficult characterized by quantitative indicators and other reasons, theempirical research is not related to the “environment”, an important factor to affect the corporate governance efficiency. It also contributed to some hypotheses could not be established.On the base of theoretical and empirical analysis conclusions, this paper put forward somecountermeasures to improve the corporate governance efficiency in China, such as improving andstrengthening the relevant stakeholders’ rigid constraints, establishing and improving the economymarket and competition mechanism, establishing an effective re-negotiation mechanism andimproving the company regulation of the external environment.