Research On The Benefits And Costs Of The Corporate Control And Their Influence On The Corporate Performance

The existing literature on the benefits and costs of corporate control mainly takes two views:One view is that control benefits, especially private benefits of control are the interests occupied by major shareholder through its controlling position, which should be reduced or even avoided; Another view is that private benefits enjoyed by the major shareholder is the compensation of the control costs, which is reasonable. The former view from the angle of protecting minority shareholders is of positive significance, but the problem is they consider private benefits of control are all the violations of minority shareholders’interests, and completely ignore the supervisory role played by major shareholder in the company management; The latter view takes into account the cost of control, which is undoubtedly a step forward, but the problem is that major shareholder who participates in the company management is not gratuitous.The exertion of the control will benefit the body of control and at the same time will also bring the corresponding costs to the body of control. When he is exercising control rights, the body of control will consider both the costs and benefits which are brought to him by the decision, he would take decision-making of control to maximize their interests. Therefore, the composition and structure of the benefits and costs will influence control decision-making, which has impact on corporate performance. The paper concludes by theoretical analysis that the direct control of the earnings of incentive has a positive influence on corporate performance, and on-the-job consumption is negatively correlated with corporate performance. Indirect control mastered by the board of directors lacks of the independence and the independent director’s compensation has nothing to do with corporate performance. Under the condition of dispersed ownership, because minority shareholders generally choose not to participate in the supervision due to the high participating cost, their benefits and costs have nothing to do with the corporate performance; and under the condition of equity concentration, the major shareholders have an incentive to supervise company, their control profit have the inverted u-shaped relation with corporate performance. When control private benefit is large while the acquisition cost is small, the controlling shareholder may damage the interests of the company for the self-interests. Based on the theoretical analysis above, this paper proposes three hypotheses:(1) Corporate performance is positively related to the executive incentive pay;(2) Corporate performance is negatively related to the on-the-job consumption;(3) Corporate performance has nothing to do with the independent director’s compensation. In order to verify the above hypothesis, this article selects the2003-2012data of China’s nine listed companies for the empirical analysis and the result is consistent with the three hypotheses.On the basis of theoretical analysis and empirical test, finally this paper puts forward to the suggestions which will improve the allocation efficiency of corporate control, coordinate the benefits and costs of the exertion of the control to improve the corporate performance:(1)Establish an effective incentive pay system, improve the selection mechanism of the executive, coordinate the benefits and costs of the senior management;(2) Improve the system of board of directors and clear the power and the obligation to coordinate the benefits and costs of the director;(3)Improve the system of general meeting of shareholders in order to coordinate the benefits and costs of major shareholders and minority shareholders.