A Research On Large Foreign Shareholders, Corporate Governance And Expropriation Of Controlling Shareholders

Since China’s capital markets limited opening to the outside world, foreign capitals enterto China’s capital market through a variety of ways and hold different shares in China’s listingCorporations. When holding more than5%of the totall shares, the singal foreign sharehold willgen influence on the governance structure of the listing Corporation. Because the ownership oflisting Corporations in China are relatively concentrated, expropriation of controllingshareholders has always been in listing Corporation governance. Therefore, under thebackground of opening, the study of foreign large shareholdings, corporate governance and theexpropriation of controlling shareholders, will have significance in theory and practice.This paper starts from the the theory of large foreign ownership and expropriation ofcontrolling shareholders, grouping collected data of large foreign shareholders probationally,testing the relationship of large foreign ownership and controlling shareholders’ expropriationdegree,through regression analysis and robustness testing, and in the end, makes conclusions asbelow:(1) when the large foreign shareholds have shares between5%and20%, they will play asupervision role and they can inhibit the controlling shareholder tunneling effectively, but whenthey own the shares between20%and30%, the effect will be weakened. Foreign shareholdersand the controlling shareholder have certain interest coordination, especially when the foreignlarge shareholding ratio increased to more than30%, they are likely to collude with thecontrolling shareholder and occupy the interests of small shareholders.(2)Because holdingshares between5%and20%, the foreign financial institutions can effectively reduce theexpropriation of controlling shareholders. The large foreign non-financial institutionalshareholders are holding high proportion of shares, so they can not effectively inhibit theexpropriation of controlling shareholders; on the contrary, they prefer to participate in theoccupying interests.(3)Large foreign shareholds can not efficiently restrain the controllingshareholders expropriation in state-owned listing Corporation. Therefore, this paper offers someproposals on the expropriation of controlling shareholders by optimizing equity structure,improving foreign financial institutions ownership and improving the legal constraints.