The Arrangement And Expropriation Of Inside Control Rights

Due to the incompleteness of contracts and transaction costs,the boundary between ownership and control of firm is not very clear either in theory or in practice.As far as residual control rights of firm are concerned,the problem of expropriation of rights among major shareholders,the board of directors and the managers is prevalent in the internal principal-agent relationship.Such problems also exist in China's private enterprises.In the transition from the fact that the owners of non-human capital control major decisions to the fact that the owners of non-human capital choose the management who is responsible for enterprise management,private enterprise will face two aspects of control expropriation:on the one hand,large shareholders may manipulate the board of directors and management for fear of losing control of the company to others and crowd out the residual rights of control of the board and management;on the other hand,due to the specific human capital investment,limited use of talents and lack of professional ethics,the management will expropriate the control rights of major shareholders or the board of directors.Especially in the firms where are lack of supervision or passive supervision of large shareholders or the board of directors,the management can successfully implement the duty expropriation.Similar cases abound in real life.For example,the Ali partnership system that protects founder's control;Chen xiao,CEO of gome,manipulates the control rights to seize the assets of major shareholders and restrict their voting rights by transferring corporate interests to the board of directors;Baoneng and Vanke's major shareholders continued to increase their holdings and occupied the control rights of the management,etc.This research finds that there are many important problems in these companies,such as the absence of protective measures for founder's control rights,major shareholders or management control the board of directors,the unclear boundary between the control rights and ownership rights,and the inconsistency of residual claims and residual control rights.Therefore,the key to China's private corporate governance is the balances of the control rights of major shareholders,board of directors and the management in the agency chain,so as to protect the interests of small and medium shareholders,rather than the conflicts of interests and free riding between large shareholders and small shareholders that the popular theory thinks.Previous scholars' discussions on human capital owners' sharing of corporate control rights and the distinction between specific control rights and residual control rights lays a theoretical foundation for the study on the arrangement of corporate internal control rights.The difficulties of further studying the arrangement and expropriation of internal control right are as follows:(1)It is difficult to verify the benefits of control rights of the board and the management and reveal the transfer of control rights;(2)under the framework of major stockholders-board-management,it is difficult to establish a robust mechanism of balances to reduce the efficiency of expropriation by insiders,including major shareholders,and protect external shareholders.In order to deal with the above difficulties,this dissertation makes the following research:(1)on the basis of defining the residual rights of enterprises,according to the classification methods of Berle,Means,Fama,Jensen,Hart,Shleifer and Vishny,the arrangement of control rights is divided into three levels of major shareholders,the board of directors and management,to measure the situation of the expropriating and seizing the control rights among the major shareholders,the board of directors and management of private listed companies in China.(2)based on Grossman and Hart's theory of control benefits,this dissertation estimates the level of PBC of major shareholders of private listed companies in China by applying the transfer premium of block share,and discusses the influence of factors such as equity structure and the characteristics of board of directors on the level of PBC;review and improve the problems in corporate governance mechanism from the perspective of control right.(3)the fight for control rights between the board of directors and the management in order to achieve the return of control rights may lead to the transfer of control rights.Therefore,the internal control transfer behavior and its transfer path are used to indirectly examine the board of directors and management's PBC.(4)the formation mechanism and realization mechanism of MBO and collusion are analyzed.By analyzing the two cases of Gome and Vanke,the different control structures provide different channels for major shareholders,the board of directors and management to fight for PBC:use the capital market to eliminate dissent,or the management and the board of directors collude to occupy the interests of major shareholders,or major shareholders remove management because of the divergence of interests etc.Analyze the control rights that can be squeezed out by the board of directors and the management and the gains of control rights that can be grabbed in the process of the transfer of control rights.(5)focusing on the internal control problems and established tort status of expropriation of listed private companies in China,this dissertation summarizes the internal control governance scheme and constructs the general mathematical and empirical model of corporate control governance.At the same time,the regression of equity incentive and reward incentive is conducted to reveal the relationship between these two governance schemes and enterprise performance,verify the efficiency of the governance scheme,and put forward policy suggestions accordingly.This dissertation,based on the property rights theory,contract theory and corporate governance theory,takes the Chinese listed private companies as the research object,and makes a theoretical explanation of the relationship among the factors of control of major shareholders,the board of directors and the management.logically,this dissertation proposes hypotheses and constructs an econometric model.According to the results of the econometric model,verify the authenticity of the theoretical inference,and put forward targeted governance programs and policy recommendations.The sample data in this dissertation are from Chinese listed private companies.According to the statistical requirements for data collection and collation,determine a reasonable number of samples,ensure that the sample data is real and effective,to ensure that reliable empirical research conclusions could be drawn.Use the panel data model to conduct a quantitative analysis of the sample data,mainly discussing the relationship among whether the chairman concurrently serves as the general manager,number of meetings attended by independent director,shareholding ratio of the board of directors,shareholding ratio of the top five shareholders,shareholding concentration ratio,equity balance degree and PBC;use the two-stage least squares model to analyze the relationship among the equity incentives,top compensation incentives and company performance.Regression and test are carried out respectively.Parameter estimation is carried out to determine the coefficient and quantitative relation between variable coefficients.The mathematical relationship between variables is established by mathematical model,which lays a foundation for the establishment of empirical econometric model.Adopt the method of typical case study,through dissecting the typical cases of Gome control dispute and struggle for control of Vanke and Baoneng,and further verify the reliability of the theoretical conclusion.This dissertation is divided into six chapters.Chapter one is the introduction.The second chapter is the theoretical basis and literature review of control rights.Chapter 3,chapter 4 and chapter 5 are the main body of this dissertation.The logical sequence is to measure the benefits of control rights of major shareholders first in chapter 3,then measure the benefits of control rights of the board of directors and the management and the transfer of control rights caused by the competition for control rights in chapter4,and finally examine the governance scheme of internal control right encroachment and its effectiveness in chapter 5.Chapter 6 is the epilog.The first chapter,mainly discussing the outline of the dissertation and its significance,sorting out domestic and foreign research trends,defining relevant concepts,clarifying research ideas and methods,and indicating innovative points and shortcomings of the dissertation.The second chapter reviews and evaluates relevant literatures on enterprise contract structure and rights arrangement.This chapter points out the development,contribution and unsolved problems of relevant theoretical research,and lays the research foundation and direction for the further exploration of this research.The principal-agent theory holds that with the gradual separation of ownership and control of an enterprise,there are three types of principal-agent relations among major shareholders,the board of directors and the management in an enterprise.Agents do not always act for the benefit of the principal due to the nature of the public goods and the free-rider problem.Agents have the tendency to expropriate corporate control and squeeze the interests of the principal.The principal-agent theory concludes that the ownership structure with the minimum agency cost is optimal.The school of firm contract theory represented by Coase Williamson,GHM,Zhang Weiying and Zhou Qiren further clarified the incompleteness of frim contract,so that the contracting parties could not specify the rights of each party in the process of implementation in advance(before signing the contract).Although the ownership of each party can be clarified according to the proportion of investment,the rights of control cannot be arranged and agreed in advance because of its dependence on the state.Firm contracts make room for the ex post rearrangement or renegotiation of control.The residual control right comes from the incompleteness of contract and the relative scarcity of elements.The conclusion of the firm contract theory is that the firm is an organization that can effectively reduce transaction costs,which saves a lot of costs of third-party adjudication and hold-up.The distribution of rights before signing the enterprise contract affects the bargaining ability of all parties after signing the contract(fighting for control rights),and the arrangement of control rights after signing the contract is structure-oriented and institution-oriented path dependence,so the right arrangement or governance structure is of vital importance.According to the thoughts of GHM Aghion,Tirole and other scholars on the theory of control rights,the arrangement of control rights of enterprises will affect the future negotiation ability of the contracting parties and thus affect the financial decisions and manager incentives.When firm performance becomes worse,control will be transferred from management to outsiders.There is a negative relationship between the control right of major shareholders and the initiative right of management.The theory of control rights pays more attention to both the transfer and the competition process of residual control rights between investors and enterprise management,and comes to the conclusion that stakeholders should share control rights.In addition,the second chapter also divides the arrangement of control rights into three levels:major shareholders the board of directors and the management,and defines their specific control rights and residual control rights.The third chapter,according to the theory of control benefits,studies on the benefits of control rights of major shareholders.this chapter firstly differentiates the shared benefits from private benefits and differentiates the monetary benefits from non-monetary benefits.Secondly,it reveals the main ways that the major shareholders grab PBC,such as related party transactions,take control of the private earnings,personnel control.Thirdly,based on the comparison of the measurement methods of major shareholders' PBC at home and abroad,the premium method of block equity contract transfer is improved,and the factors affecting major shareholders' PBC are summarized.This dissertation estimates the benefits of control of major shareholders of China's private listed companies through the method of block equity contract transfer premium,and establishes an econometric model for the level of PBC and its influencing factors.Econometric results shows that at present,private listed companies in China have a high level of PBC.Chairman or vice chairman concurrently holding the post of general manager has an inhibitory effect on PBC level.The number of meetings attended by independent directors is not related to the level of PBC.The shareholding ratio of the board of directors is negatively correlated with the level of PBC,while the shareholding proportion of the board of directors and the management is positively correlated with the level of PBC.The degree of ownership concentration of the top five shareholders is negatively correlated with the level of PBC,while the degree of ownership balance is negatively correlated with the level of PBC.The fourth chapter,after the research on the benefits ofcontrol rights of major shareholders,studies the forms of the benefits that are from the control of the board of directors and management and the transfer of control for obtaining the benefits of control and the two typical internal control transfer paths(MBO and collusion),analyzes the forming mechanism and realization mechanism of MBO and collusion.This chapter uses the classic case of Gome and Vanke to empirically verify the occurrence of the competition and transfer of control rights under different control structure arrangements and how to apply the corporate system to solve the problem of insider control expropriation.The conclusion of the fourth chapter is that in the process of control transfer,it is easy to squeeze the control rights between major shareholders(the founder usually serves as the chairman of the board),the board of directors of and the management.A reasonable company system can effectively so as to protect the principal's property rights.When signing the financing agreement,it is necessary to set up the bottom line of the founder shareholders' equity,protect founder shareholders.In order to maintain and strengthen the control rights,the founders and their agents should grasp the corresponding residual claim;otherwise the major shareholders or raiders may take advantage of the shareholding ratio to get a majority of the vote,thereby ousting the founder.When concluding the company's articles of association,it is necessary to set up the founder shareholder protection clause.The founder shareholders shall retain the right of veto on major matters and the right of nomination of the directors,and shall establish relevant provisions in the articles of association to prevent the board bearer from removing the current directors.Within the framework of the contract,it clarifies the rights of the management and avoids the problem of insider control caused by the over-amplification of management control.The management incentive mechanism is introduced to provide the institutional guarantee for the management to exert their initiative and talents.Reasonably determine the role of the board of directors and prevent giving boards too much rights.If the board of directors is given too much right,it may lead to them to evade the responsibility of integrity.Chapter five,studies the expropriation and governance of internal control rights of firms.This part reveals the major shareholders' tunnel behavior,expropriation of the listed company's capital by major shareholders,distorted dividend distribution and control of the company's assets etc.,summarizes the equity incentive,compensation incentives and other governance solution,using the mathematical model and the empirical analysis to verify the validity of the equity incentive and incentive management scheme,namely the influence of equity incentive and incentive schemes on firm performance.Econometric results shows that the shareholding ratio of the board of directors is positively correlated with firm performance,the shareholding ratio of the largest shareholder is negatively correlated with the firm performance,and the top three total annual salaries of the directors and managers have a negative effect on firm performance.The fifth chapter concludes that the control of major shareholders,board of directors and management will lead to insider control problems,equity incentive for the board of directors is an effective scheme to curb the problem of insider control,the entrenchment effect of the major shareholder's shareholding is greater than the convergence effect,the compensation incentive schemes of China's listed private companies are inefficient.The sixth chapter puts forward some policy suggestions on optimizing the share structure,strengthening the function of the board of directors and perfecting the incentive mechanism,which provides the reform direction for the establishment of the balance mechanism among the major shareholders,the board of directors and the management of Chinese enterprises and the arrangement of residual control rights,and can be used for reference in perfecting the market of control rights,securities market and professional manager market.Finally,the future research direction is determined as how to prevent the major shareholders from using related party transactions to encroach on the interests of the company and the arrangement of the control rights of state-owned enterprises in the mixed-ownership reform.