Research On Private Benefits Of Control By Controlling Shareholders In China's Listed Companies

As the research in the field of Corporate Governance deepens, the role of controlling shareholder has attracted more attention, the core issue in corporate governance has been shifted to the question that how to deal with the agent problem between controlling shareholders and non-controlling shareholders. Private Benefits of Control(PBC) is the key of this problem.There are many evidences to prove that the controlling shareholders do expropriations. The most common and direct means is to occupy funds of the listed companies, including directly occupying, borrowing contract, connected transactions and asking guarantee from listed company. Furthermore, they also use means of connected transaction to transfer resources and insider dealing. In addition, they prefer to equity financing and glossing over performance to help expropriating behaviors. They have done great harm to the development of China's capital market. After doing a detailed survey about the measuring methods of PBC, author selected a sample to do the emprical research, including 89 control-transfer events and 147 non-control transfer events in year 2003-2004. Using the means of Block Priemiun multiplying transfer ratio,and by regression, we find the PBC is 4.07% of net assets of the company. Adjusted by the P/B ratio, we also find the PBC 5.09%of the market value of outstanding shares ,as well as 2.79% of "market value" of total shares. But due to the methods and sample, the result seems to be low estimated. The research also find that the ROE and outstanding share have negetive effects on the PBC.It's important to find the reason. The literate model shows that there are internal incentives and external reasons. Due to the historical reason and reform manner, stated-owned controlling shareholders need funds for saving the enterprises left by reforming, which gradually forms an invisible institution. The non-state-owned controlling shareholders need funds for financing and private benefits. It is the different mankind characters that makes the different incentives.In the aspect of external restriction, there are many problems: the supervision mechanism is weak; the investors' ideolodge and behaviors in investing are not mature; the financial and audit agents as well as independent directors are not "independent" ,or betray their ethics; the media and public opinion are restricted and not protected well; and the law to protect the minority shraeholders and its enforcement are not strong enough. All of these make the controlling shareholders dare to do expropriation.The last is the suggestions, including whole-reforming strategy of state-owned companies, broadening the financing channels of nonstate-owned companies, gradually solving stock seperations problem, perfecting the supervision mechanism, making agents and institution on independent directors more formal, encouraging the medias to reveal the wrong controlling shraholders did and giving them more space, and last but not the least, the strengthening of the law and its enforcement.