The Analysis On The Influencing Factors Of Private Benefits Of Control

In the current field of corporate governance, the research of agencyproblems between controlling shareholders and decentralized minorityshareholders has become a mainstream direction. It is also the focus ofthe majority of scholars in this context of Chinese Trans-economy. Thevalue of private benefits of control is one of the key reference indicatorsto reflect he degree of infringement of the minority shareholders bycontrolling shareholders. Throughout the domestic economic situation,although the share reform has been completed, the reality of shareconcentration and low efficiency of board mechanism is still twodrawbacks in the governance structure of listed companies. Owing to theauthority, controlling shareholders have critical influence on the decisionsand major authorized arrangement of all aspects of the company. Coupledwith the low efficiency of board mechanism, minority shareholders cannot compete with the controlling shareholder, so that controllingshareholders have the opportunity to get a higher value of private benefitsof control. And the minority stock holders have remained in a vulnerableposition. And therefore, our paper discusses the relationship betweenownership structure, board features and private benefits of control, in order to perfect ownership structure and board mechanism. The purposeis to help reduce the value of private benefits of control and develop thecapital markets.In the article, we used a combination of theoretic and practicalanalysis. In the theory section, we described two related theories, i. e.Asymmetric information theory and the principal-agent theory.The generation mechanism, cost analysis and factors of private benefitsof control were also described in this section. In the empirical section, wepresented the calculation formulae of benefit of control value, taking intoaccount some factors such as changes of relevant laws and policies inChina, in order to minimize the measurement error. After that, wedesigned a series of reference indexes, which can reflect the ownershipstructure and board features. Then we selected the listed companies basedon the control transactions of shares from2005.1.1to2010.12.31as thesamples. On that basis, the article examined the internal connection ofthem.Finally, the article came to conclusions as follows.1. In china, thevalue of private benefits of control level is about15.97%during theperiod of2005-2010, using the correction calculation formulae. And it is slightly higher than the level of world average value (about14%).2.From the perspective of ownership structure, the positive relation existsbetween the value of private benefits of control level and the controllingshareholder share holding ratio (T1), the ratio of the largest and thesecond shareholder (T2). And the impact of the latter is not significant.The significant negative relation exists between the value of privatebenefits of control level and the ratio of the second to the tenthshareholder (T2-10).3. From the perspective of board features, thenegative relation exists between the value of private benefits of controllevel and board size (Sboard), proportion of independent directors (IBR).And the impact of the latter is not significant. The significant positiverelation exists between the value of private benefits of control level andthe dual roles of chairman of board who also serves as CEO. Therefore,this article presents several suggestions from the perspective ofownership structure and board features: set up the decentralized andpower balance of ownership structure; adjust board structure mechanisms,i. e. the manifestation of board functions and the regularization of boardstructure; set up the independent hiring agency and compensation expertsto strengthen Checks and balances of independent directors.