| Firm is a Nexus of a Set of Contracting Relationships (Coase, 1937; Jensen and Meckling, 1976; Fama, 1980). There are two levels of Principal-Agent Relationship in the nexus of firm: Shareholders-The Board, and the Board-Top manager. Through these contracting relationships, only some important decision control rights are kept in shareholders while the board of directors holds the most decision control rights, including firing top managers and other monitoring actions.The incompleteness of contract and self-interest of agents cause agency problems. Based on the nature of contract, agency problems are divided into two categories: debt agency problems and equity agency problems. Firing agent is a cheap and effective way to resolve serious agency problems (Fama, 1980; Fama and Jensen, 1983). Firing incompetent agents is an important function of the board of directors and has been taken as a key criterion to judge the efficiency of the board. When agency problems are serious enough beyond what the principals can bear and can not been resolved by other governance mechanisms such as monitoring, incentives, then they will choose to fire these agents. On the contrary, excluding some special cases, the agents fired shall be those who have serious agency problems. As a result, it are those and only are those who have serious agency problems get fired. So, we can analyze the efficiency of corporate governance and investor protection through investigating the correlation between agency problems and agent change.This study analyzes the agency problems between shareholders, debtors and agent from agent change angle. Base on the result, we take a deeper research in the effect of different ownership structure and outside market monitors on agency problems. The study finds: (1) although there are serious agency problems between agent and debtors in China's listed companies, no agency cost of debt was found, which means Chinese commercial banks and others debt investors are still not rational enough and China's capital market is still not efficient enough. (2) Perk Consumption problem and overinvestment problem are two very important factors that cause agents to be dismissed, and this also proves that Perk Consumption and overinvestment problems exist commonly in the China's listed companies. (3) According the companies with control right, agent's Perk Consumption and overinvestment acts get controlled effectively. (4) Balance Mechanism of Blockholders can control the agent's laziness and thereby reduced the low efficiency problem of state owned listed companies. (5) This paper does not find the monitoring and governance function of outside market participants (including foreign stockholders and debtors).Now it is the crucial period of China's capital market reform. The shareholder structure reform have almost completed, which will be a historic step for China to a mature capital market. The next step, it will focus on how to perfect the corporate governance structure of listed companies, weaken agency problems and to protect investors more efficiently. This study positively analyzes the effect of ownership structure on agent change from agency cost angle. Based on this, we then take a further research on the governing function of ownership structure on agency problems and investor protection. There is a wealth of literature investigating the change of CEOs, but most of them analyzing the relationship between corporate governance mechanism and CEOs from the angle of performance of firms. However, we did not find the literature analyzing the agent change and ownership structure (shareholders structure and outside financing) directly from the angle of agency costs. So, we hope this research can give some contribution to China's capital market development and investor protection. |
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