Do Independent Directors Protect Minor Shareholders' Interest: The Evidence Of Full Circulation Reform

Most Listed Companies in capital market of China acquire by state-owned enterprises restructuring, it has made an excessively centralized shareholding structure, which intrigued the conflict between the controlling block holders and middle or small investors even more serious. To solve the problems and improve corporate governance structure, it is needed to introduce an equal force to restrict the behavior of control abuse. Regarding this, the Chinese Securities Supervisory Association introduced the independent director system in 2001,as a mean to strengthen the independence of the board of listed company and restraint on the large stockholders'behavior, thus to protect the middle or small shareholders' benefit. After independent director system was enforced in Chinese company, theories about independent directors became one of the focus problems of academic research.The article combines the theoretical analysis with the empirical studies, using econometrics models to study the effect of independent director on the protection of minor shareholders'benefit in the reform of the dual-class equity structure.In the section of theoretic analysis, It introduces the basic theory of independent director, including agency theory, stakeholder theory, resource rely theory, and analyzes the location of the function of independent director. Then, it introduces the background, and the conditions of protection that the independent director effect on the minor shareholders'benefit in China. In the end of this section, the functions of independent director in he reform of the dual-class equity structure are further analyzed.In the section of empirical studies, an empirical examination of the relationship between independent director and consideration is done. Specifically, We apply descriptive statistic analysis, corresponding analysis, linear regression and logistic regression by Stata. We test the influence of variables such as education background, profession background, the proportions of the independent directors and allowance on consideration.The empirical results show that the effect independent directors help circulation shareholders get more consideration from non-circulation shareholders was limited, it tells the independent directors'effect on supervising restricting the large shareholders' behavior, protecting minor shareholders is much less than the expected effects. According to the results of empirical testing, the study puts forward proposals on the domestic development of the independent director system at last.