The Relationship Between The Nature Of Non-controlling Shareholders In Family Business And The Effectiveness Of Power Balance

Since the Chinese Reform and Opening up,family businesses have been an important component of China's economy.Characterized by low initial cost,rapid decision-making and strong internal cohesion,family businesses have showed great energy and tremendously pushed China economy development.However,through highly-centralized control power,family controllers can easily carry out various ‘tunneling' behaviors to harm the benefits of outside small shareholders.Thus,study on how to restrain family controllers' ‘tunneling' behaviors and protect outside small shareholders have big theoretical significance and application value.Based on the perspective of family control,this article analyzes the relationship between the nature of non-controlling shareholders in family business and the power balance effectiveness.According to the ‘tunneling' motivation and ability,this article divides the family control into 3 ranges: [10%,30%)?[30%,50%)?[50%,100%),and considering the different ways non-controlling shareholders carry out about attorney ship,they are divided into four types: state-owned investors,institute investors,human being investors and private enterprise investors.Then applying interaction term adjustment effects test method and taking the 2010-2014 Chinese Main Board listed family businesses as samples,this article builds the regression model and tests the power balance effectiveness of different non-controlling shareholders in different family control range.The research results show:(1)With the increase of the family control,the degree of the ‘tunneling' of the family controlling shareholders will significantly decrease,which implies the strong enterprise owner consciousness of the family shareholders.(2)When family control lies in [10%,30%),non-controlling shareholders' power balance is best.With the change of family control,different non-controlling shareholder power balance is different.When family control lies in [10%,30%),the power balance effectiveness of the non-controlling private enterprises is best.When family control lies in [30%,50%),the power balance effectiveness of the non-controlling state-owned shareholders and institutional investors is best.When family control lies in [30%,50%),the private enterprise can effectively restrain the tunneling behaviors of family controlling shareholders by means of external governance environment.Thus,in order to restrain family controller ‘tunneling' behaviors,family businesses' internal governance structure and external governance conditions should be improved simultaneously,giving full play to non-controlling state-owned shareholders and institutional investors.The main innovation points of this paper are:(1)based on the perspective of family control,this article tests the effects of family control has on family shareholders' ‘tunneling' motivation and the power balance ability of non-controlling shareholders,implementing the empirical evidence of family control's effect on family shareholders' ‘tunneling' behaviors and measuring the non-controlling shareholders' power balance effectiveness more accurately.(2)Paying attention to the varying ways different non-controlling shareholders adapt on principal-agent issues and ownership execution,this study verifies the differentiation of power balance of different non-controlling shareholders and explaining the different roles different non-controlling shareholders play in power balance.(3)Considering the effect external governance condition has on power balance,applying empirical methods,this study verifies the adjustment effect in power balance.This paper is helpful for comprehensively understanding family shareholders' decision-making behaviors and non-controlling shareholders' power balance,enriching the related theory of power balance in family businesses and providing direct evidence and reference for government to monitor family controllers' behaviors and protect outside small shareholders.