Research On The Crash Of Interests Of The Shareholders In Xinjiang's Listed Companies

Based on the agency theory, the paper analyzes and verifies the corporate governance and the firm value of 26 companies listed in Shanghai and Shenzhen Exchange in 2003 and leads to the discovery that these companies conflict in some aspects agency.Using the term "tunneling" in a narrow sense refer to the transfer of resources out of a company to its controlling shareholder(CS), it does not cover other agency problems, such as incompetent management, placement of relatives in executive positions, excessive or insufficient investment, or resistance to value-increasing takeovers. Tunneling comes in two forms: First, a CS can simply transfer resources of the firm for his own benefit through self-dealing transactions. Such transactions include asset sales and contracts such as transfer pricing advantageous to the CS, excessive executive compensation, loan guarantees, and so on. Second the CS can increase his share of the firm without transferring any assets through dilutive share issues, minority freeze-outs, insider trading, or other financial transactions that discriminate against minorities.The paper defines the shareholders holding more than 30% of the ownership of listed companies as CS and examines the agency problems between CS and minority shareholders in Xinjiang's listed companies. Empirical results show that firms with CS has higher market value than firms without CS. Ownership held by CS is negatively correlated to firm value, but is positively correlated to controlling shareholder's embezzlement of the company's funds.The paper defines the percentage of value discount of firms with controlling shareholder by comparison with firms without controlling shareholder as agency costs of controlling shareholder. The agency costs of controlling shareholder averages 17.42%.Above mentioned empirical results suggest that the agency problems of controlling shareholder do exist in Xinjiang's listed companies. It occurs in the emerging market, or it does also happen in developing countries with their generally poor law enforcement. Using legal reform to reduce the agency problems is then a crucial element of promoting financial and economic development.