Study On Private Benefits Of Control In Chinese Listed Companies

The principal-agent problem is always one of the important issues in corporate governance. With the development of the capital market, the researchers found out that not all of the company shares are highly dispersed, private benefits become a new research focus. Due to the separation of ownership and control, controlling shareholders have motivation and ability to use their right to grab more private benefits than small and medium-sized shareholder. As China has became the world’s second largest economy, it’s quite significant to study the occupation behavior of controlling shareholders and the their relationship between ownership structure and financial condition in China, which will definitely help to improve corporate governance theory, and to protect the small and medium-sized shareholders’ rights and interests.This thesis firstly explores relevant theories on the basis of literature review regarding benefits of substantial shareholder control. Secondly, the motivation, method and other factors of substantial shareholders have been studied. How to measure private benefits of control reasonably will help to understand the seriousness of the occupation. However, we cannot explain the paradox phenomenon by the traditional theory. Therefore, some scholars subdivide the private benefits of control and admit that the private benefits are rational within a certain scope.This thesis selects samples from listed companies in China A-share market between2004and2008. These samples have been divided into two groups according to ROE, one is reasonable control group and the other one is excess control group. The private benefits level of reasonable control group is the reasonable compensation to substantial shareholders, which can be accepted by small and medium-sized shareholders. The private benefits of excess control group contain excess control private benefits, namely the violation of the small and medium-sized shareholders. Through the calculation, we concluded that violation is about24.26%in China. Then we select6factors to analysis on the e influence degree of the private benefits, such as the share ratio of the largest shareholder after the transaction, the scale of the company, the stock-balance, ROE, asset liability ratio and industry. At last we put forward suggestions to help protect the investors’ interests.The results show that ROE, the share ratio of the largest shareholder after the transaction and asset liability ratio have positive correlation; however, the company scale, the stock-balance and the industry have negative correlation. That is to say the violation of the small and medium-sized shareholders has been enlarged with the increase of the ownership concentration. Financial leverage shows a significant correlation with private benefits of control, which means higher asset-liability induces the substantial shareholders to grab more from company. The scale of the company and stock-balance power have a negative correlation with premium. The larger the scale is, the lower the private benefits of control will be. Sock-balance power also plays a negative role in private benefits of control.This thesis enriches the researched on private benefits in China. However, the samples selected is between2004and2008, when all the stocks can be liquid in the capital market, the big shareholders occupation is more concealed, and here stock manipulation has not been involved in.