The Research About Relationship Between China’s Legal Protection Of Investor And Corporate Value

The investor is the cornerstone of the development of capital market, the protection ofinvestor is the core of corporate governance. With the development of China’s capital marketget into full circulation times, controlling shareholders, senior managers and institutionalinvestor still have obvious advantages in stock, capital and information, it will make thecontradiction about information asymmetry in China’s capital market more prominent.Capital market is a market with high degree informationization, strong capitalization andwidespread participation, investors have good legal protection is very important for stabilityand sustained development of capital market. For China’s capital market is experiencing thetransitional period, the legal protection of investor, especially the relationship between legalprotection of investor and corporate value, has become an important research topic.This paper uses the standard research and the empirical research methods to study therelationship between legal protection of investor and corporate value. Based on the literaturereview, this paper start from theoretical analysis, make the “law and finance” as a startingpoint, combine with the institutional background of China’s legal protection of investor, usefive related theories to discuss the reason and significance about legal protection of investor,In the empirical research, this paper make a tracking survey on236listed companies whoappeared on the market before1995, choosing16years data (1995-2010) as the researchsample, through the construction of legal investor protection index, puts forward the researchhypothesis and model, then use the descriptive statistics method and linear regressionanalysis method to examine the research hypothesis.The results of this study show that, in the information asymmetry imperfect market,because of “agency problem” and “free riding”, the medium and small shareholders canhardly restrain and supervise controlling shareholder’s behavior, the controlling shareholdersare inclined to use their information advantage position to “tunneling” grab the profit ofmedium and small shareholders. Legal protection can effectively inhibit predatory behaviorof major shareholders, it is benefit to the capital market’s economic function about pricediscovery and resource optimization, the improvement of legal protection of investor cancontribute to the improvement of enterprise value, they have significant positive correlation.