Research On Private Benefits Of Control

With the development of theory and practice, the conflict of the corporate governance has been a shift from shareholders and managers to the controlling shareholder and small shareholders. When the external protection and internal governance are not adequate, the shareholder who is in the hand of the company's control has the scarce resources for getting own well-beings. In recent years, the cases that the controlling shareholders make use of the right of control of listed companies in China damage the interests of small shareholders are increasing.Because it is highly concentrated ownership in most country, the controlling shareholders not only get the public benefits but also get the private benefit that can not enjoy by the shareholders in the transfer process. The paper researches on the private benefits of control which contain the compensation of the cost and the occupation on the small shareholders by the unconstrained control. How to measure private benefits of control and protect the interests of small shareholders has become a key issue. However, as market competition is not sufficient, the current calculating methods always underestimate the private benefits of control. Combined with theoretical analysis and empirical research, the paper analyses the reason and the means such as occupations of funds, guarantees, related party transactions, dividend policy and manipulation of the profit. After concludes the past research results, the author puts forward nine factors that influence the private benefits of control. They are the percentage of share to the controlling shareholder, the degree of ownership, concentration to other shareholders, company size, the debt ratio, profit level, ratio of cash and investment in assets, the number of independent directors, the transfer ratio and whether largest shareholder is state-owned share. The paper selects 97 samples through transaction agreements from the year 2005 to 2008 in Shanghai and Shenzhen stock market and analyzes the influencing factors by the regression model. The conclusion of the study shows that:private benefits of control is 29.19%, which is a relatively high level; the private benefits of control are negative to the debt ratio, the number of independent directors, ROE, assets size and positive to the transfer ratio. The result is statistically significant. At last, the author puts forward some constructive suggestions such as improving the structure of listed company, consummating the legal system, strengthening supervision and management to protect the interests of investors and preserve the development of our capital market.