An Analysis Of Controlling Shareholders Expropriation Impact On Earnings Quality Based On Private Benefits Of Control

More and more empirical studies proved concentration of shares and appearance of controlling shareholders become international trend of corporate governance. It is highly concentrated ownership in Chinese listed companies, and some controlling shareholders are in the hands of the company's control. Those controlling shareholders with the control right, expropriate the interests of minority shareholders. In order to conceal this kind of income and the real achievement of company, the controlling shareholders intend to operate company's profit, affects the earnings quality.The domestic and foreign research about Private Benefits of Control focuses on controlling shareholders against the interests of minority shareholders and empirical analysis of influencing factors of Private Benefits of Control. Now China's current economic environment is presenting two phenomena at the same time. On the one hand, controlling shareholders grab Private Benefits of Control seriously, and the other, investors can not always satisfied with the earnings quality of listed companies, so that this article attempts to analyzed the correlation ship between controlling shareholders' expropriating behaviors and listed company's earnings quality from the perspective of analysis of Private Benefits of Control, through measuring the level of China's listed companies' private benefits of control, which is the focus of the study.This article elaborated the theories about Private Benefits of Control. Clearly summed up the concept of Private Benefits of Control, analyzed the principal-agent relationship between the monitoring and controlling shareholder, two different effects of supervision and infringement, and the causes of Private Benefits of Control, and analyzed the correlation ship between controlling shareholders' expropriating behaviors and listed company's earnings quality from the perspective of analysis of Private Benefits of Control. Then, we made a statistical analysis on the controlling situation of the listed companies of China and commutated the level of Private Benefits of Control, and found that after the share reform in China, most of the listed companies obviously have controlling shareholders, particularly in the extractive industries, manufacturing, electricity, transport and other departments, the largest shareholding ratio is much higher than the average level, and these industries were mostly controlled by the state. When measuring the level of private benefits of control, we adopted the control over the transfer of premium method, the result showed the level of Private Benefits of Chinese listed companies were large, far greater than international standards. Further, we chose 92 samples from 2005 to 2007 and took the variable of Private Benefits of Control into the model of earning response coefficient and confirmed the controlling shareholders' expropriating behaviors make negative influence on earnings quality.In view of the findings, we analyzed the reason why controlling shareholders' expropriating behaviors reduced earnings quality in detail, including stockholders' right separation, concentration of shares, Chinese law's insufficient protection for minority stockholders' benefit and lack of effective information disclosure system. At last, we put forward the related policy proposals, such as, establishing the active constraint mechanism to constraint controlling shareholders' expropriating behaviors, strengthening the legal regime and accounting system construction to protect the minority stockholders' benefit, and so on.