The Game Analysis Of A Typical Listed Company After The Splitting Share Structure Reform

This paper outlined three game models to analyze players' strategies in the information disclosure process of a typical listed company in China since the 2005 SSSR.The splitting share structure of China's listed companies had a remarkable change since the SSSR in 2005 and all shares would be tradable because of a less centralized share ownership structure. While the fact was that asymmetric information and incompatible targets of incentive plans between shareholders and the manager together with the manager's egoism and opportunism result in the critical Principal-Agency problem, yet inside control could be strengthened through corporate management indeed. Therefore, the first part of this article was developed as analyzing the manager's utility function, finding the sub-game perfect Nash equilibrium solution with complete information, which was restricted by the option incentive mechanism, and putting forward policy suggestions. The results showed that the corporate value was not only affected by the mangers' output elasticity of endeavor and his cost elasticity of endeavor, but also subject to the corporate allocation resources and its profitability.The second part of this article was developed according to the fact that fraud information had been disclosed by the manager since stock option incentive mechanism was carried out. The manager and big shareholders, both called the "insiders" and with the same purpose of pursuing share value maximization, had intense opportunistic motive to despoil small shareholders of their wealth. Therefore the reasons and realizing conditions of collusion between the insiders was analyzed based on the definition of the core and Shapley value. The results of this part showed that in addition to strengthening their control of earnings and cost respectively, the parametric control of one player's utility function might have an effect on the other's collusive activity, thus mutual constraints of the manager and big shareholders were quite important to protect small shareholders' interests, which in the long term would further improve the company quality.The last part of this paper outlined a dynamic game model to analyze fraud information disclosure by listed companies in China since the SSSR. By analyzing the conditions of coalition-proof Nash equilibrium between large shareholders and the manager, exogenous variables' effects on the equilibrium as well as the first-order condition of the maximum utility of the supervisory department (representing small shareholders' interests), this article showed that efficient capital markets required a high supervising probability and intensity of penalty to the "insider" and shortened intervals between supervising conducts as well. Moreover, there existed a unique optimum incentive stock option ratio over which fraud information disclosure becomes more rampant. This resulted in a higher intensity of penalty to the manager given more stock option incentive and, in contrast, a higher intensity of penalty to big shareholders of a well managed and efficiently capital-structured company once fraud information disclosure was detected. The model's conclusions were consistent with the facts of listed companies in China. Finally, the model made sharp suggestions for the mechanism design of stock option incentive as well as suggestions for the supervisory department to achieve efficiency of China's capital markets in the long run.