Empirical Research On Benefit Expropriation Of Minority Shareholders By Controlling Shareholders

Under the circumstance of highly ownership concentration in China, one of the most important things is how to reduce the minority shareholders' benefit expropriated by controlling shareholders. The development of capital market, the allocation of economic resources, and the whole national economic prosperous can not be achieved without effect investor protection. This paper supposes that the ownership concentration character of China listed companies will not sharply change in near future, and make a measurement of the degree of expropriation made by controlling shareholders based on the samples derived from Shenzhen Stock Exchange and Shanghai Stock Exchange listed corporate whose control shares were traded during 2003 to 2007,The methods in previous studies consider the control premium (CP) as private benefits of control (PBC), which has the probability of overestimating or underestimating. This paper makes a little improvement while modeling these previous methods, which is, taking the future cash flow increase into account. After calculating the PBC of China listed corporates, this paper presents an international comparison as well, from which a conclusion can be drawn: the PBC level in China is higher than the average level of the other co untries.This dissertation explores the relationship between the private benefits of controlling right (PBC) and some influential factors. In the empirical research section, this paper will make specific analysis based on different factors and their respective influential mechanisms instead of establishing multiple linear regression equation. First this dissertation makes an analysis of variance about the influence the corporate laws will have on PBC, and draws a conclusion that there is no significant difference in PBC atter the implementation of the new Company Laws. One of the innovations in this paper is the introduction of a new factor, which is the degree of asymmetry of ownership and control right. Statistic analysis shows a significant positive correlation between the degree of asymmetry and the PBC, So the asymmetry degree is considered to be a more fruitful way to understand the relationship between PBC and the ownership structure than the commonly used Variable-first shareholders' percentage in past. It also finds that the relationship between the minor shareholders benefits expropriated by controlling shareholders and the ROE is weakly related through a correlation analysis. Fromthe conclusion in this dissertation we can get some useful implications, In the end of this article, it is presented some policy recommendations, such as lay a solid legal basis, make small and medium-sized shareholders to exercise their right with more convenience and enforcement, enhance information disclosure and transparency, and also briefly discuss the possibility of introduction of preferable shares to China capital market and the role the preferable shares will play in the protection of minority shareholders interests.