Controlling Shareholder-executives’ Decision-making Power Configuration And Corporaterisk-taking

The prevalence of ownership concentration of Chinese listed companies has caused theproblem of largest shareholder’s expropriation. Meanwhile, the insider control phenomenonexistingin many listed companies also has resulted in executives’ abuse of power. A series ofcorporate governance issues with Chinese characteristicshappened because of the specific capitalmarket’s institutionalbackground.The dispute between controlling shareholder Huang guangyuand CEO Chen Xiaofor the control of GOME in2010happened exactly in thisbackground，which had caused imporantimpact to the operating of GOME. It was the outbreak of the powerconflict after Chen Xiaojoined GOME in2006.Therefore, we selected the perspectiveofdecision-makingpower confict to study the impact ofcontrolling shareholderandexecutives’power configuration tothe volatility of corporate performance.In order to analyzethe relationship between corporate risk-taking and different structure of decision-making powerconfiguration,we divided GOME’s operating behaviorinto two stages from2006to2010,dependingon different structureof decision-making power configuration,which meansdifferent combination of controlling shareholder’s power and executives’ power in this paper.The case analysis is based on theoretical analysis. According to the calculating result ofdecision-making power configuration structure and risk-taking, we found that GOME’s structureof decision-making power configuration and risk-taking showed periodic characteristic.Therefore,we divided the risk-taking ofGOME into two stageswhen conducting case study tocompare the differences of risk-taking, depending on the different structure of decision-makingpowerconfiguration.We found that if controlling shareholders’ power is too large, which wouldcauselargest shareholder’s expropriation and the Board’s wrong decisionfor the reason of lackingof collective decision-making mechanism,corporaterisk-taking would be higher. If controllingshareholder’s power and executives’ power reaches a balance, the problems above would beeased, corporaterisk-taking would be lower. Finally,we had a discussion and made suggestionsaccording to the study.