Study On The Protecting Effect On Minor Shareholders By Independent Director

With the development of modern enterprise, the core issue of corporate governance has gradually shifted from the agency problem between shareholders and manager to the interest conflict between major shareholders and minor shareholders. In large companies, major shareholders are in the position of controlling the company and minor shareholders are in a relatively weak position, large shareholders tend to transfer property from listed company, seeking for personal gains. In China, as most of the listed companies are reformed from state-owned enterprise, the "dominance" phenomenon is very significant. Major shareholders tend to empty listed companies in various forms, and such events occur frequently. In this regard, China Securities Regulatory Commission introduced the independent director system in 2001, hoping to strengthen the independence of the board of listed companies, to restrict the behavior of large shareholders, to protect the interest of minor shareholders.In this paper, the protecting effect on minor shareholders by independent director is discussed. First of all, the author reviewed theory and literature about independent director and the protection of minor shareholders from domestic and foreign. Secondly, the background and status of tunneling behavior were analyzed. Again, combining the special governance background of China, the author studied the relationship between independent director characteristics and tunneling. At last, taking the listed companies in China in 2005-2009, the author explored the protecting effect on minor shareholders by independent director.The author finds that the tunneling behavior of major shareholders reduces the value of listed companies,and is not good for minor shareholders. Independent directors play a weak role in protecting the interest of minor shareholders. The number of independent director, the salary independent director received have no impact on the tunneling behavior of major shareholders; the times of meeting independent director participated in can significantly inhibit the tunneling behavior of major shareholders;independent director which have a good operation mechanism can significantly inhibit the tunneling behavior of major shareholders.In the end of the thesis, according to the result of empirical studies, the author put forward some policy recommendations about protecting the interests of minor shareholders from three perspectives,adjust the ownership structure of listed companies, improve the system of independent director, strengthen the supervision of listed companies.