The Balance Of Power Among Large Shareholders, Investor Protection And Firm Value

In recent years, scholars around the world focus on the problem how to improvecorporate governance, and we pay more attention on the same problem happened inChina's public companies. However, there are many problems waiting for been settled,such as improper ownership structure, poor investor protection and opaqueinformation.Corporate governance system includes internal governance mechanisms, suchas board of directors, management compensation, ownership structure and financialinformation disclosure. It also includes external mandatory governance mechanisms,such as legal systems, market discipline and regulatory infrastructure. Internalgovernance mechanisms are direct tools of corporate control, while externalgovernance mechanisms are indirect. The development of corporate performancedepends on the improvement on internal and external governance mechanisms.We analyze the relationship between ownership structure, the choice of auditorand firm value in this article. Rational ownership structure is an important way tomaximize firm performance, and the balance of multiple shareholders is viewed as aavailable method to improve the shareholder governance function. The highcentralized ownership structure in our domestic public companies makes the largestshareholders play a crucial role in the betterment of firm performance, also the otherlarge shareholders act on firm value, so we discuss the action of other largeshareholders in corporate governance efficiency under such background in thisresearch. In order to assure investors' benefit, it's necessary to disclose financialinformation in detail, thus choosing an auditor with high quality means providingmore exact and transparent information about management and financial statements toinvestors, also means giving the small shareholders better protection. So in ourresearch, the choice of auditor is not only an internal governance mechanism, but alsoan external governance mechanism. The balance of power among large shareholdersand the choice of auditor are two different mechanisms in corporate governance, and then produce different governance effects.This dissertation consists of six chapters:Chapter 1, Introduction. This chapter puts forward the main issues of thisdissertation and discusses the background, and introduces the arrangements of thisarticle.Chapter 2, Summarization of corporate governance principles relevant onthis research. This chapter disscusses largest shareholder having the positive andentrenchment effect on firm value, we investigate the the governance mechanismabout balance of power among multiple shareholders on this basis, at last we view thechoice of auditor as a variable of investor protection and explain the relationshipbetween multiple shareholders, choice of auditor and firm value.Chapter 3, positive studies on region effect of the largest shareholder;chapter 4, empirical studies on the relationship between multiple shareholdersand firm performance; chapter 5, empirical analysis about the relationshipbetween the balance of power among multiple shareholders, Choice of auditorand firm value. These three empirical chapters are the main body of this paper. Inthese parts the author designs different models and variables to take regressionanalysis about governance efficiency on different ownership structure. In chapter 3,the author takes all the sample into four parts and discusses the positive and negativeeffects on firm value of the largest shareholders among different samples; in chapter 4,the author defines the balance of power among large shareholders, and exploresempirical relations between multiple shareholders and firm growth, then discusses thedevelopment of ownership structure; in chapter 5, the author chooses the choice ofauditor as a variable of investor protection and takes a positive analysis about therelationship between choosing large auditor and the balance of power among multipleshareholders.Chapter 6, research results and policy suggestion. In this part we sum up theresults of this dissertation, and then account for the lack of this research and thepossible improvement in future. At the end of this paper, the author points out themeasurement of improving corporate governance mechanisms on large shareholders and puts towards relevant policy suggestions under the systematic background ofChina.In this dissertation, two main academic contributions are provided as follows:1. The positive and negative effects of large shareholders on firm value aresystematically analyzed, specially the core role of the largest shareholders areemphasized. All the results are helpful for the betterment of ownership structure andinternal governance mechanisms.2. Based on defining the choice of auditor as a variable of investor protection,the author checks empirical relationship among choice of auditor and balance ofmultiple shareholders. The function of corporate governance on large shareholdersand firm value are analyzed on this basis. All of the conclusions are useful for thegovernance reform of China's public companies and the development of capitalmarket.