Controlling Shareholders, Payment Incentive And Corporate Investment

In recent years, the study on Corporate Governance by an increasing number ofresearchers has proved the existence of controlling shareholders. In order to maintain thedominant position of the public ownership in our country, it is required that during theprocess of restructuring the state-owned enterprises, based on our country’s industrypolicy,the state-owned shares must hold the dominant position including the absolutecontrol and relative control. For meeting the listing requirements of the monitoring bodies,most listing companies adopt the restructuring mode of separating non-core assets, whilevery few choose whole-restructuring. The economic consequence of the above system isthe high share concentration of the listed companies. Although the large shareholder caneffectively improve the level of supervision on the managers and avoid disperseshareholders’ free-rider behavior, large shareholders have their own interest, so theypursue PBC by making use of the controlling right. Then this will lead to the goal ofmaximizing the value of listed companies change. The business decisions do notmaximize company value, but maximize the large shareholder their own interests.Under the background of the special system in our country, because of the absence ofthe ultimate ownership of the state-owned shares, the large shareholders agencies becomethe specific way of large shareholder control. The payment of the large shareholdersagencies is usually made by the payment board, which is featured as low and stable,lacking the consideration of the company’s achievements. In order to gain private benefits,the controlling shareholders usually make investment decisions in the cost of underminingthe overall value of listed companies, which result in the non-efficiency investment oflisted companies, including under-investment and over-investment. For avoiding theappearance of the above problem, the shareholders must seek an effective way.This thesis chose the listed companies of manufactures industry between2006and2010whose controlling shareholders hold over20%shares as the data samples, dividingthe samples into three parts as the central enterprises, local business and privateenterprises, and the capital-investment mode and non-efficiency investment mode arebrought in. This paper finds through the capital investment mode analysis that under allthe three type business of large shareholder control, the corporate investment arenon-efficient, but the local business and private enterprises show more significant.Through the non-efficient investment mode study, it has the following three results:① The larger of the separation between the cash flow rights and control of the largeshareholders, the more serious of the non-efficient-investment is (mainly theover-investment), but the central enterprises are less sensitive than the other two types;②The CEO’s payment is negatively related with non-efficiency investment (mainlyover-investment), which means the lower the CEO’s payment is the more serious theover-investment is. In this part, the local business shows more significance than thecentral enterprises and private enterprises;③The larger of separation between cash flowrights and control rights, the more significant of the negative relation between CEO’spayment and non-efficiency.