Study On The Agency Conflict Between Large Shareholder Alliance And Outside Shareholders And Its Influence On Firm Value

With the separation of corporate ownership and managerial authority,the large shareholders' interest is inconsisitent with the other benefit counterparts.The large shareholders and manager become a interests alliance to plunder private benefit from control. This behaviour reduces the other benefit counterparts' income and the enterprise value. And then produces agency costs. First, the large shareholders use the fact that the information asymmetry is existence between the large shareholders and outside shareholders to plunder outside shareholders' profit and the enterprise. Second, Because of the effect of the incentive mechanism of stock option, the investment object of the large shareholder collusion is maximization their own benefits not the value of enterprise, even though the investment project is negative net income.Based on dynamic risk management, this paper analysis the agency costs which come from the agency conflict between the large shareholder alliance and outside shareholders how to influence the value of enterprise.First, Based on the continuous-time model , to establish the dynamic risk management model of the large shareholder alliance and outside shareholder.Based on different models, and discussed the investment choice of the large shareholder alliance and outside shareholder, in order to analysis the influence of the agency costs on the value of enterprise which comes from the large shareholders alliance control. The results show that: (1) There are two projects, project 1 and project 2. The two projects' risk premia are not zero, andμ₁-μ₂,μ₁-μ₂ are negative side, the large shareholder alliance` investment objects depart from the outside shareholders` objects. So the large shareholder alliance` investment decision increases the investment risky, and then produces the agency costs which decrease the firm value. (2) Whenμ₁-μ₂,μ₁-μ₂ are same side, the large shareholder alliance and the outside shareholders have the same investment choices. So there are no the agency costs.Next, this paper analysis that the large shareholder alliance's plunder from outside shareholders through establishing model. The results show that: the large shareholder alliance's always plunder the profit of outside shareholders.When the law which protect outside shareholders' profit is poor, the separation degree between the clash flowing rights and control rights of the large shareholders alliance increases, the large shareholder alliance's plunder aggravation, the enterprise value decrease, the agency problem intensify.Last, according to the conclusions of the final papers submitted the relevant policy recommendations.