Equity Structure And Disequilibrium In Distribution Of Control Power

This paper deals with the problem of distribution of control power m enterprises. From an analysis of equity structure, the characteristics of distribution of control power in enterprises are shown. According to theory of the firm, firms are analyzed as a bind of a set of contracts among certain agents with conflicting interests. As is known, there are two kinds of shareholders, which are inside shareholders and outside shareholders. As different interest group, inside shareholders and outside shareholders trade off their benefit in many different dimension. As a result, certain mechanism is established on this basis. Therefore, form of enterprises or organization become a suitable contractual framework, which coordinates contradictory interests of agents related to the set of contracts to ensure a common objective of the organization, including inside shareholders and outside shareholders. But in enterprises, distribution of control power is seldom in proportion to distribution of residual claims. This study is designed to determine the effects of this disequilibrium. The paper considers it necessaiy to pay enough attention to rights shareholders should have. Investors get their rights according to the risk they bearing and resources they putting in, and firms bear responsibility according to the operating and claims of investors. In a final analysis, the nature of enterprises is a series of contracts and transactions. If the transaction has been unfair in a long run, the final result will be horrible. Nowadays, there is a large room for legal system and markets to be perfected for sound in China.