The Study Of Capital Occupying By Major Shareholders,Underinvestment And Governance Mechanisms

Inefficient investment not only causes the profits of enterprises to reduce.profitability to decline, but also reduces the market value of the enterprise, seriously hindered the development of the enterprise, therefore attracts the attention of practitioners and academe. Non-efficient investment mainly manifests as excessive investment and insufficient investment. In China’s listing Corporation, investment deficiency is more common than excessive investment, lack of investment has become the main trend. At the same time, the behavior of big shareholders occupying the listing Corporation funds is very common in the capital market of our country, and even spreads to Growth Enterprises Market. The behavior of big shareholders occupying the listing Corporation funds has seriously affects the normal operation of the listing Corporation, damages the interests of small shareholders and creditors, increases the financial risk of the listing Corporation, so that the function of the stock market can not to play normally. However, the domestic existing research mainly concentrates in the excessive investment caused by the agency conflict between shareholders and managers, relatively research on the problem of insufficient investment is less, and the study on the problem of underinvestment at the big shareholders occupying the listing Corporation funds is much less. The purpose of this paper is to find the evidence of relationship between investment shortage and large shareholder occupation, and the mechanism that the behavior of large shareholders occupying the listing Corporation funds causes insufficient investment, and verifies the corporate governance mechanism can effectively inhibit the large shareholder capital occupied, and alleviates the insufficient investment caused by large shareholders capital occupying.The research methods of this paper is empirical research and normative research, mainly based on empirical research. First of all, we review the related literature at home and abroad, which is about the reason of insufficient investment, the agency problem of controlling shareholder, the relationship between the agency problems of controlling shareholders and the lack of investment, the effect of governance mechanisms on the agency problem of controlling shareholder, based on the conclusion of previous studies, proposes the research perspective of this article. Secondly, we discuss comprehensively the reason of the internal cash flow affecting investment in listing Corporation, the relationship between large shareholders capital occupying, internal cash flow and investment of less, and the influence of the internal governance and external governance environment on large shareholders capital occupying, and put forward six basic assumptions of this article on the basis of theoretical analysis. And then, we select the financial data and corporate governance data of listing Corporation in Shanghai and Shenzhen stock markets from2003to2008, through the establishment of multiple linear regression model, and using statistical software SPSS examines the relationship between major shareholders’ embezzlement of funds and internal cash flow gap, the relationship between internal cash flow shortage and inadequate investment, as well as the effects of internal and external governance mechanism on shareholders capital occupying. For large shareholders’ embezzlement of funds, we use other receivables to total assets ratio to replace it. For the internal cash flow gap, we use the absolute value of the negative difference between net cash flow generated from operating activities last year and the expected investment that year to total assets ratio to replace it. For the lack of investment, we use the absolute value of the negative residuals of the expected investment model to measure. For the governance mechanism, we choose equity restriction, board leadership structure, the independent director system and the legal protection of investors to return to investigate the effect on controlling shareholder expropriation behavior. Finally, we sum up the conclusions of this research, and make suggestions as how to improve the listing Corporation internal and external governance environment in order to curb the behavior of big shareholders occupying funds.Through empirical research, the paper draws the conclusion as follows. The capital occupation by major shareholders and internal cash flow gap is significantly positive correlation. Internal cash flow shortage and the lack of investment capital is also significantly positive correlation. That is to say, the more money the big shareholders occupying, the bigger the internal cash flow gap is, so more serious the investment insufficient degree of the listing Corporation is. The higher the degree of ownership balance is, the less the amount of capital occupying by the major shareholders of listing Corporation is. The chairman of the board and general manager by the same person strengthens capital occupation behavior of large shareholders. The more the number of independent directors is, the less the amount of capital occupying by the major shareholders is. Since China’s current law on the protection of small investors is still relatively weak, it cannot restrain the behavior of big shareholders occupying funds.Combining the conclusions, we think, it should start from internal governance mechanism and external governance environment of the listing to seek solution of big shareholders occupying funds. For the internal governance mechanism, we propose a sound and equity ownership restriction mechanism and the independent director system. In terms of the external governance environment, we propose to improve the law protection of investor, give full play to the role of accounting firms, and improve investor self-protection awareness. So then it can further constrain capital occupying by large shareholders, relieve the problem of insufficient investment caused by it, and promote the healthy and stable development of the capital market.