Family Control,Minority Shareholders Protection And Firm Value

As more and more study on the equity structure of the company, the evidence from many countries suggest that the equity is relative concentrated in many companies. And many companies have controlling shareholders, China is no exception.Family holding is one of the more common types among various kinds of controlling shareholders. The pyramid structure and multi-shareholding structure are common controlling methods which used by family enterprises. And family members often serve as important positions such as the President or the General Manager of the companies. These ways of strengthening control right would lead families’voting rights exceeding families’cash flow rights which make their power of controlling companies’wealth over their corresponding responsibility. There holding positions provide convenience for private gain, which eventually harm the interests of minority shareholders and reduce the enterprise value. Therefore, for family-controlled companies, the agency problems between family shareholders and the minority stockholder is very important in the area of corporate governance, accordingly, we should focus on protecting the interests of minority shareholders.In this thesis, family control, minority investor protection and firm value are the research topics. We want to study whether the controlling families make the companies value decline and deprive the interests of minority shareholders by controlling listed companies. First, the paper analyzed the double agency problems of family controlling companies. Second, the paper discussed the research results about the minority shareholders protection in China and abroad. The last, the paper made an empirical test on whether the resources of listed companies plundered by controlling families.This thesis included five parts totally.The paper began with introduction, the research background, ideas and methods, frame structure of the thesis, the main content and research contributions are the main contents.The second part is literature review, which is divided into two sections. The first section defined the family enterprises and its double agency problems and addressed the pyramid structure in family enterprises; in second section, we made a theoretical definition of investors’protection, and discuss the related study.The third part is the theoretical analysis, which is divided into two sections.In section one, we analyzed whether the value of the firm controlled by the family will decline; in section two, we analyzed the relationship between minority shareholder protection and the value of the companies which controlled by families and discussed several ways about how to separate the cash flow rights and voting rights of controlling shareholders.Part four is an empirical study about the family holding, minority investors’ protection and firm value in listed companies. It mainly consists of theoretical analysis, research hypotheses, sample selection and variable definitions and empirical analysis.Part five is the research conclusions, implications and policy recommendations. According to the empirical results, combined with Chinese current situation, we put forward some constructive suggestions included improved corporate equity structure, optimize the structure of the board of directors; Perfect securities market system construction and strengthen legislation, improve the efficiency of law enforcement.The main conclusions of this paper are that family controlling shareholders ownership proportion and enterprise value is inverted u-shaped relation, when family ownership proportion is low, with its rising the enterprise value will increase, but after reach a certain proportion, with the further increase of family ownership, the enterprise’s value will decline; In family businesses, the higher the degree of separation of cash flow right and the voting rights which indicate the degree of minority shareholders protection, the lower the value of the enterprise; The different way of holding doesn’t have a significant impact on corporate value under pyramid shareholding structure and multiple equity structure.The main contribution of this paper is using a novel perspective in research process. We divided the family-controlled listed companies into three types, direct holdings enterprises, multiple holding company and Pyramid shareholding structure; and carried on the empirical analysis of the each type of the family holding companies and made a comparison between them. In addition, we gathered a relatively new economic data, which stand for the new economic situations of today’s China after the Equity Division Reform and Subprime Crisis.In general, this study has a certain practical significance and reference value for family enterprises governance and minority shareholder’s protection in china.