Research On Firm Performance, Information Transparency And Benefit Expropiration Of Large Shareholder

With the great uncertainty of the economic development in future, the wholeworld put the attention to the emerging economy like China. China is a typicalemerging capital market country. The stock market in China has been built just for ashort period; and the related system construction is not complete, there also existedthe prevalence of most listed companies “dominance” in Chinese companies. Undersuch system background and corporate environment, the ultimate shareholder hasboth the power and motivation to obtain the private interests of control by thecontrolling power, which not only undermines the value of the company, but alsoinvades the interests of minority shareholders. So how enterprises can inhibit theexpropriation of ultimate controlling shareholder to minority shareholders? There isan attempt to solve the problem by using corporate performance, corporatetransparency and the stake of ultimate controlling shareholder.In this research，the common factors including ownership structure, proportion ofindependent director, size of firm, asset-liability ratio and so on has been controlled.Empirical research is the main method adopted in the research, and data about listedfirms from2008to2010are used to analyze the related relationships. This papermainly investigates the relationship among corporate performance, corporatetransparency, the stake of ultimate controlling shareholder and larger shareholderexpropriation, draw the following conclusions:1. For different level of the corporate performance in the listed firms, the largershareholder behaves differently in terms of expropriation, showing N-typerelationship. When the previous corporate performance(the previous ratio of main return on assets) is lower than0.1219, the larger shareholder expropriation tends toincrease as corporate performance increase, there is a trend of transferring thecompany assets by the larger shareholder; when the previous corporate performance(the previous ratio of main return on assets) is between0.1219and0.6249, there isnegative relationship between the larger shareholder expropriation and corporateperformance, and the larger shareholder expropriation is decreasing; when theprevious corporate performance (the previous ratio of main return on assets) isabove0.6249, the larger shareholder expropriation tends to increase as the corporateperformance increase, and the larger shareholder expropriation appears again.2. The more aggressive the earnings, and the more opaque the corporatetransparency in the financial statements, the more severe is the larger shareholderexpropriation of minority shareholders’ interests.3. For different level of the ultimate size of holding percentage in the listed firms,the larger shareholder behaves differently in terms of expropriation, showing N-typerelationship. When the stake of ultimate controlling shareholder is lower than0.1778,there is positive relationship between larger shareholder expropriation and the stakeof ultimate controlling shareholder; when the stake of ultimate controllingshareholder is between0.1778and0.6991, the larger shareholder expropriation tendsto decrease as the stake of ultimate controlling shareholder increase; when the stakeof ultimate controlling shareholder is above0.6991, the larger shareholderexpropriation, there is positive relationship between larger shareholder expropriationand the stake of ultimate controlling shareholder, and the larger shareholderexpropriation tends to increase as the stake of ultimate controlling shareholderincrease.Finally, based on the above empirical research and the current situation in China,the policy recommendations are as follows: firstly, bring the stakeholders except thesmall and medium investors into the scope of the optimization of corporategovernance, strengthen their supervision on the larger shareholder by playing theiradvantages respectively. Secondly, enhance the construction of the external legal environment, at the same time; improve the rigor and rationality of internalinstitutional arrangements. Last but not the least, facilitate the reasonable distributionon the proportion of shares of major shareholders and other shareholders, andfacilitate the role of effective checks from other shareholders in the ownershipstructure.