A Study On The Economic Consequence And Determinants Of Private Benefits Of Corporate Control

This paper deals with private profits of corporate control and answers the following 2 questions.Firstly,what are the determinants that affect the private profits of corporate control under Chinese special institutional background? Secondly,what are the economic consequences of private profits of corporate control?The first part of this paper introduces the related research theories,some basics of private profits of corporate control and gives a brief review and comment on related literature. Then,using a sample of listed companies that had both the controlling block and the non-controlling block within same year from 1997-2003,I evaluate the overall level of private profits of control of Chinese listed companies from two aspects:on the one hand,to estimate shared profits of control right with the help of transfer price of non-controlling block;on the other,to evaluate the private profits of control base on the transfer price difference between the controlling block and the non-controlling block of a company.Thirdly,I have an empirical analysis on determinants of Chinese private profits of control right.Furthermore,the value of the sample company is evaluated by its 3-year unusual accumulated monthly return after control right transfer.Research found that private profits of corporate control and company value creation are of negative relationship. The final part of this paper summarizes the main research findings of this research and proposes suggestion for improving the legal protection system for the listed companies, constructing effective control right market and perfecting the governing system.The innovation of this research lies in the improvement on the model of private benefit of corporate control.The use of transfer premium of control to evaluate the private profits of corporate control is more direct and accurate.And a theoretical and empirical study on the relationship between private profits of corporate control and company value creation are another contribution of this paper since there is little literature found on this issue.