Research On Controlling Shareholders' Deprivation Of Listed Companies In Connection Transaction In China

Under the background of highly concentrated ownership structure in China, listed companies are under the control of controlling shareholders in fact. In order to maximize their self-interests, the controlling shareholders of listed companies dominate companies' operating policies and the business activities of listed companies are affected seriously. Connection transaction has the characteristics of unfairness and secretiveness, so it becomes the principal means of controlling shareholders' deprivation. Due to the dominance of state-owned feature, how to inhibit controlling shareholders' deprivation and protect the minority interests becomes one of the most urgent problems in Chinese securities market that are needed to be solved recently.The root cause of why controlling shareholders deprive interests of monitory shareholders is the information asymmetry between controlling shareholders and minority shareholders. This paper analyzed controlling shareholders' deprivation activities in connection transaction just from the perspective of information asymmetry and contract incompleteness. Firstly, this paper introduced the definition of connection transaction, then proposed and analyzed the cost of controlling shareholders' deprivation activities needed to be spent during the deprivation, applying Coase Transaction Cost Theory. Secondly, the paper expatiated the specific performance means of controlling shareholders' deprivation activities in connection transaction and emphasized seriousness of controlling shareholders' deprivation activities led by the particularity of ownership structures, corporate governance mechanisms and legal environment in China, and analyzed the motivation of controlling shareholders' deprivation activities deeply from the perspective of information asymmetry and contract incompleteness. Then, there was a further analysis of specific performance of controlling shareholders' deprivation activities with actual cases, and the conclusions were that because of the special internal and external environment where controlling shareholders of listed companies are in China, the cost of controlling shareholders' deprivation activities was lower and controlling shareholders performed more opportunistic behavior, so the deprivation of controlling shareholders was more serious in China. Lastly, based upon above analysis, the relative policies proposals are proposed from aspects of external supervision and internal governance of listed companies.