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The full circulation largest shareholder encroachment behavior analysis

Author: SunJingQin From: www.yourpaper.net Posted: 2009-04-02 19:31:33 Read:
[Abstract] split share structure reform on China's capital market by nature, the basic defect, the interests of the various stakeholders standards converge to create new conditions and means, but also for large shareholders to grab the interests of minority shareholders. Circulation time, major shareholders as a new group of investors into the secondary market, benefits will be more tied to the price. The major shareholders can take advantage of the available information and resources, through the publication of false information, earnings management, operating on short-term behavior, performance manipulation in order to seek to maximize their own interests, erosion of the interests of minority shareholders. Restricting the largest shareholder of an embezzlement lies in the improvement and innovation of corporate governance and regulatory regime.

The split share structure is in a particular historical stage in China to make special arrangements for the capital market. The special design of the system prevailing social conditions, to maintain the stability of the reform has great practical significance. However, this system has created a standard of interest between the holders of tradable shares and non-tradable shareholders inconsistent, resulting in the behavior of non-tradable shareholders distorted tradable shares become the biggest obstacle to hinder the development of the capital market. From May 2005 onwards, China began the listed companies split share structure reform, non-tradable shares into tradable shares, equity tradable shareholders only the size of the points, no circulation and non-tradable, and now the vast majority of listed companies has completed the split share structure reform. Tradable, non-tradable shares and tradable shares interest criteria contradictions resolved - with emphasis on the company's stock price, but the of large shareholders occupation of the interests of minority shareholders still exists, how to stop the encroachment of large shareholders behavior is related to the listed the healthy development of the major issues.

A full circulation largest shareholder's expropriation

Some people think that to solve the split share issues, market issues such as shareholder occupation of the interests of small shareholders will be solved, it is not true. Is the most developed of the U.S. stock market has suffered from many of the cases of major shareholders to use their strengths to deception and erosion of minority shareholders. Such as Enron is in full circulation under the conditions of financial fraud. A late start in China's capital market, making the full circulation of the case, the largest shareholder of occupation of the interests of minority shareholders is more likely.
(A) profit-driven nature of natural capital. Major shareholders as an economic body, in order to pursue their own revenue maximization, the use of the funds at its disposal and information superiority is bound to the interests of small shareholders, the lack of external constraints and supervision conditions, encroachment and plunder, which is occupation of the fundamental motivation.
(B) the cost of non-compliance. The largest shareholder of whether to take occupation of the interests of minority shareholders, which often depends on two factors: First, large shareholders to take occupation of behavior for extra income; Second, is the major shareholder to take occupation of behavior and thus pay costs. Obtain additional revenue is greater than the cost, large shareholders can choose to take the behavior. At present, the Chinese government the largest shareholder irregularities detected and punishment is not enough, so that the largest shareholder of the wrongful act was committed, willing to take risks.
(C) corporate governance inefficient. China's listed companies in the prevalence of major shareholders control the Board, the independent director system a mere formality, but there are Board offside exercise the rights phenomenon, the Board of Supervisors can not play due to the supervisory role. Therefore, the largest shareholder of lack of check and balances, provides an opportunity to its occupation of the interests of small shareholders.
(D) external supervision is weak, the legal system is not perfect. Current market supervision departments and agencies regulatory lack of breadth and depth of the joint coordination mechanism between them, makes the largest shareholder of the occupation of behavior is difficult to effectively control. Existing legal system is not perfect, the protection of the interests of minority shareholders is difficult to obtain effective legal system.

Second, the results of manipulation is full circulation shareholder's expropriation primary means of

Due to the above reasons, so that even in the case of full circulation, the largest shareholder of the occupation of the interests of minority shareholders, the problem still exists. Encroachment means taken by the largest shareholder is different, in the era of the split share structure, the largest shareholder the encroachment of minority shareholders is related party transactions, major shareholders through related party transactions transferred from the company's internal revenue. After the equity tradable largest shareholder measure the value of the equity is no longer a net asset value per share, but the secondary market, the stock price, shareholders through related party transactions occupation of the behavior of the interests of small shareholders, will always be reflected in the stock prices up, thereby reducing the market value of all shareholders, resulting in the largest shareholder profits through related party transactions will increase the difficulty. But also increases the channels of direct access to capital from the stock market in the interests of the major shareholders, major shareholders can be manipulated performance of a price achieved maximize their own interests. For example, if the largest shareholder of the company's prospects are not optimistic about the results manipulate the good news in the short term to raise the stock price, and then withdraw to leave a listed company. Therefore, the circulation time, major shareholders through related party transactions occupation of the interests of minority shareholders will be convergence, but mainly use a variety of methods to improve the company's stock price manipulation by the results, as the main means of encroachment.
(A) the publication of false information. Split share structure reform, large shareholders and the secondary market price has a direct interest in order to obtain more favorable pricing, major shareholders and executives enthusiasm will enhance disclosure of information, but the disclosure of false information motivation more intense. Some companies took advantage of the channels of information disclosure, publication of false information, the stock price fluctuations, resulting in out of the stock price and the Company's actual results, misleading analysis and judgment of the minority shareholders of the company, whose major shareholder is profited. For example, some listed companies using the media to tout their own investment projects and results, the share price rose sharply, however, when the stock goes down, the investor only to find that all this is false. Company simultaneous negative and positive information disclosed in the two points in time, the ups and downs caused by the secondary market, the stock price, the major shareholder profit, loss of minority shareholders.
(B) the use of earnings management. Tradable earnings management of listed companies will continue to increase, especially after the implementation of the new accounting standards in 2007, the accounting option for listed companies to provide more opportunities for earnings management. For example, new standards, the introduction of fair value in accordance with international practice. The fair value model is based on the market value or future cash flows, the present value of the property as the primary measure of assets and liabilities accounting model. Visible in the calculation of the fair value of the factors affecting the fair value of the two: First, the company's future operating cash flows, estimated operating cash flows will be influenced by many factors and uncertainty; second is the discount rate. The choice of discount rate in market interest rates, the impact of the expected future income, but also a factor of uncertainty. In this way, the use of fair value as a basis for measurement attributes, more flexible option will change the size of the company's assets, liabilities, thus affecting the results of operations of the Company.
(C) to take on short-term behavior of the operation. The largest shareholder overly concerned with price, their behavior will inevitably tend to short-term. After the full circulation, major shareholders as soon as possible in order to profit from the secondary market, and executives conspire to take damage to the Company's long-term development strategic objectives, and implementation of short-term business strategy. For example, by reducing the expenditure of a variety of research and development and staff training costs, the company's short-term profits and thereby led to short-term stock price rose.
, Major shareholders also false asset evaluation, cook the books really do approach to adjustment of profits, in order to achieve the purpose of its encroachment.

Third, corporate governance and regulatory system improvement and innovation is key to curb the largest shareholder encroachment behavior

Capital profit-driven occupation of the root causes of major shareholders to achieve, can not be completely eliminated. After full circulation, the largest shareholder not only has the right to vote by hand, and has the right to vote with their feet. Rights need to be constrained, the largest shareholder rights increase, it must be effective regulatory constraints, otherwise it will create opportunities for its occupation of behavior. To eliminate the occupation of the technical means, on the other hand, you want to change the relationship between the occupation of the costs and benefits brought to light that the cost is much higher than expected revenue. In order to achieve this effect, the key lies in the improvement and innovation of corporate governance and regulatory regime.
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