Corporate Governance, Controlling Shareholders' Embezzlement And Detection Of Related Information

Statistical data showed that controlling shareholders' embezzlement among the listed company was a serious problem in China's capital market all the time. So it carries great practical significance to investigate this problem thoroughly.This paper takes the Henan Lotus Gourmet Powder Inc.(HLGP) as a typical case, focusing on researching two problems: (i)the influence of coporate governance over controlling shareholders' embezzlement; and(ii) the detection of the information related to embezzlement. And the latter is aimed to find out whether the auditors are capable of fully disclosing related information and whether the investors can perceive the embezzlement in advance. This paper also analyzes the role of independent directors in perceiving and preventing the embezzlement problem.This paper reaches four main conclusions as follows. First, the absolute control rights possessed by controlling shareholders, the complicated way they control the listed companies, the dule posts of most managers ,and other corporate governance reasons all account for the embezzlement problem. Second, though auditors generally assure related accounting information under the government's requirement, and issue special reports accordingly, they can not fully disclose all the important information related to embezzlement, such as how the money is embezzled, where the money is spent and what the accurate number of embezzled money is, etc.. Third, the disclosure of embezzlement-related information usually causes strong market reactions, which illustrates that investors are not capable of detecting the embezzlement in advance. Forth, though independent directors do carry out their responsibilities as required, the effects are no more than superficial in that, they sometimes will not be able to exercise their power of approval, they can not issue and disclose their independent opinions in time, they fail to dig out more information than auditors do ,and their proposals can not be executed for sure.