The Research On The Relationship Between Large Shareholders Control And Financial Crisis In Listed Companies Of China

An increasing number of studies have found that the control rights of firms in most companies are relatively concentrated rather than dispersed as the case in a few companies such as the USA and England. The major focus of corporate governance is no longer on the problem of management entrenchment upon shareholders’interests, but on the problem of large shareholders entrenchment upon small investors. As a result researchers have transferred their attention to large shareholders behaviors, which now is one of the most important study fields in corporate governance. The tunneling and propping theory about large shareholders is getting more and more popular and has caused wide concern in the academic world. It was recently that domestic scholars began to study large shareholders behaviors, and they mainly focused on such perspectives as firm performance, stock price movements, targeted placement, earning management and so on. This paper stands on the view of financial crisis to study large shareholders’tunneling and propping behaviors.This paper applies a method combining theoretical analysis and empirical study. It takes the manufacturing listed firms as the research objects, uses principal components method to obtain an F-score measuring the financial crisis situation by comprehensively considering solvency, profitability, operating capacity, growth ability, as well as profit quality these five aspects of a firm, and then investigates the relationship between large shareholders control and financial crisis. The paper can be divided into six parts.The first part is an introduction of the research background and significance, the framework and the method of this study.The second part reviews the relevant literature about large shareholders control so as to get some enlightenment from the current research results.The third part lays the theoretical foundation of this paper. It first deals with the relevant definitions, and then the basic theory on the relationship between large shareholders control and financial crisis. Specifically it discusses the relationship between large shareholders control and operation incentives, monitoring mechanism, investment behavior and the agent competition by analyzing the incentive effect and the entrenchment effect of large shareholders behaviors.The fourth part describes the research design. Based on the previous analysis, this part defines the proxy variables and correspondingly constructs the empirical model.The fifth part carries out the empirical tests and presents the testing results, using SPSS19.0to investigate the relationship between large shareholders control and financial crisis.The last part is conclusions and suggestions, mainly concludes this research and offers some relevant suggestions accordingly.This paper makes contributions in the following aspects. First of all, it chooses a new research perspective that is financial crisis, to investigate the large shareholders incentive and entrenchment theory. Secondly this study applies the non-paired sampling method, taking the manufacturing listed firms in Shanghai and Shenzhen A-share market as the research object and those initially ST-companies as the financial crisis sample, which can help avoiding many accidental or subjective factors. Thirdly, this paper deals with the panel data of listed companies in five years instead of only one-year cross sectional data, and it apparently improves the reliability of the research findings. Moreover the paper coins a continuous variable, F-score to measure the financial crisis state of a company, and this solves the problem of using dummy variable.