Research On Large Share-Holder's Private Benefits Of Control In China's Listed Corporations

Now, our capital market reformation and development has been entering a period companied with challenge and opportunities. Because of the system design defects and the fault of listed corporate governance, the events which controlling shareholders expropriate small shareholders by the role of controlling emerge one after another. This situation has been becoming a great threat for our capital market healthy development. How to measure the expropriation degree , and how to protect the legal benefits of small shareholders is becoming a important study issue and gathering a lot of attention of the researcher all over the world.This paper introduced the private benefits of control (PBC) theory development history, discussed the new dispute and proposed the author's own opinion. We argued that the legalization of PBC would destroy the stable basis of company stockholder's rights, and make it more difficult to measure the PBC level. This article also do a detail survey about measuring method of PBC, and select a sample to do the empirical research, including 147 agreement trades of controlling power equity transfers and 777 non-controlling power equity transfer trades in year 2005~2007. The result show that, the PBC among listed corporate is about 28% as of net assets of the corporate, and higher than Canadian, American and the Western Europe country, lower than South America countries and so on Mexico, and close with the Italy. The results indicate our capital market supervision level should be enhanced further. Empirical research also shows that the PBC has the positive correlation with the total asset, P/B and equity concentration degree, but has the negative correlation with DEBT ratio, free cash flow and the ratio of general and administrative expense compared to prime operating revenue. Among these factors, the different levels of P/B and M/E have notable influence on the private benefits of control.The last is the suggestions, including build the shareholder's action of subrogation system, set up a institution for protecting the legal benefits of small shareholders, raise the non-money benefits witch get by controlling shareholders, and make the independent director professionalization, Etc. The author hopes those propositions are favorable for our capital market healthy developing and enhance the listed corporate governance level.