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Independent directors, institutional investors and related party transactions Regulation

Author: ZhangGaoFeng From: www.yourpaper.net Posted: 2009-12-10 06:04:06 Read:
Abstract: related party transactions is a common behavior in the stock market, the results the large are conducive to the major shareholders of listed companies, to the detriment of other interests of minority shareholders. Independent director system is introduced in order to protect small investors a system, and in recent years, the increasing scale of institutional investors in the Chinese stock market, from the theoretical analysis, the greater the role of independent directors from institutional investors those more stake, the more obvious it will suppress the behavior of related party transactions of listed companies. Starting from the point of view of this study, the use of the SSE 50 Index listed companies in the sample as well as the method of fuzzy mathematics study, concluded that: the higher the proportion of independent directors in the board of directors of listed companies, the higher the pay a certain extent, institutional investors holding The greater the proportion of the smaller scale of the Company's related party transactions. Clearly illustrates the system of independent directors and institutional investors holding significantly inhibited the related party transactions on the company's behavior.
Keywords: independent directors; institutional investors; related party transactions
A literature review
Domestic and foreign direct study of related party transactions of these documents are not independent directors and institutional ownership, but the study a few of the related issues. Can be roughly divided into the following three parts:
Transaction independent director system and associated. Shanghai University of Finance and Jiang Yihong Wu Zhigang (2004) study allowance of independent directors and the relevance of the interests of the controlling shareholder, they are found in the empirical study of 455 samples of the A-share listed companies on the Shanghai Stock Exchange: independent directors to exercise special powers independent opinion on the potential threat of illegitimate interests of the controlling shareholder is the greater, the higher the independent directors legal paste standard Huai. Between personal interests and the interests of the controlling shareholder of the independent directors on the assumption that there is no relevance, in fact, be rejected. This shows that the more the controlling shareholder through non-legitimate means to make their own benefit, the more they need higher pay to buy the independent directors, and the controlling shareholder benefit is one of the related party transactions. The seal, Sixian (2005) empirical research related party transactions of listed companies in China found that the independent director system effectively constrained and reduce the listed companies to provide security for the controlling shareholder and its related parties and mortgage the occurrence of the phenomenon. However, the constraints associated with sales and related parties directly occupied the capital of listed companies, the independent director system does not play an effective role.
institutional investors and corporate governance. Weian (2007) using panel data (Panel Data) and cross-sectional data (Cross Section Data) measurement method to study the effect of institutional investors to participate in the governance of listed companies. The empirical results show that institutional investors an important role to play in improving the governance of listed companies, to reduce the agency costs of listed companies positive correlation between the proportion of institutional investors holding the company performance and market value significantly. Ridge 's to Yield Li Shanmin (2007) 1999-2004 institutional ownership of listed companies as samples, empirical research on the characteristics of the institutional investors holding listed companies, the empirical results show that, securities investment fund's holdings of listed companies in corporate governance , profitability significantly better than non-listed companies of the fund's holdings, the holding company of the holding company of the open-end funds and closed-end funds there are significant differences in terms of governance characteristics; securities investment funds and governance of listed companies decision hands vote "and" voting with their feet on the positive effects and impact of enterprise value.
corporate governance and related party transactions. Liu Jianmin Xing (2007) using 2002-2004 data of listed companies in Shanghai and Shenzhen, the empirical analysis of the size of the related party transactions of listed company's controlling shareholder, the relationship between corporate performance and controlling shareholder stake, corporate governance mechanisms. Their study found that the higher the proportion of large shareholders and its control of the company's asset size greater preference for more related transactions to transfer benefits to listed companies, as well as widespread use of related party transactions "tunneling" controlling shareholder listed The behavior of the company, and the company set the supervision of independent directors to improve corporate performance and related transactions is not obvious. Wang Lijun (2006) to our stock market from 2002 to 2004, 329 private listed companies as samples investigated pyramid control, related party transactions and the relationship between the value of the company. Discovery the pyramid control of private listed companies is not conducive to the value of the company; ultimate control of private listed companies, mainly guaranteed by related parties invaded the interests of minority shareholders capital by related parties and listed companies with related parties commodity purchase and sales activities.
2 question
Research at home and abroad on the basis of, do further study, trying to quantitative analysis of the relationship between the remuneration of independent directors, institutional investors holdings and related party transactions .
First of all, the domestic independent director system, a lot of independent directors' remuneration and related party transactions linked and less quantitative analysis. Independent director system to study the linear regression relationship between the proportion of independent directors and related party transactions, such as the closure Sixian "independent director system associated transaction affects Empirical Study" (2005) and Law Party On, Tang Qingquan of "independent The director system implementation effect of the evidence - based on the transactions of public companies "(2006). Independent directors remuneration and related party transactions combined. So, this article will be independent directors' remuneration and related party transactions combined and fuzzy mathematical method for quantitative analysis.
Furthermore, due to the institutional investors in our country in recent years that it has powerful research for institutional investors is still very macro, micro and stay in the company governance level. But all aspects of corporate governance issues relevant associated transactions this problem, there is little research for institutional investors involved. This article will attempt in this regard.
Summarizing the above analysis, explore some new ideas for independent directors, institutional investors, the role each plays in the regulation of related party transactions, that the remuneration of independent directors on behalf of independent the behavior of the directors, the behavior of the stake on behalf of institutional investors, institutional investors, fuzzy mathematics, quantitative analysis of independent directors, the role of institutional investors.
3 Empirical Analysis
data processing ideas. Paper selected on the SSE 50 Index constituent stocks, eliminate incomplete data part company, finalized a sample of 39 listed companies. In this paper, fuzzy mathematical methods specific ideas: First selected three indicators are independent directors' remuneration, shareholding stake of institutional investors, related party transactions accounted for the proportion of main business income. Next, we apply fuzzy comprehensive analysis of 2006 and 2007, each company's synthetic score method. Independent directors and institutional investors should play a limited role in the related party transactions, the independent directors' remuneration, the proportion of institutional investors holding the weight coefficients should be contrary to the weight coefficient of the proportion of main business income of the related party transactions accounted for the final weight of choice 0.25,0.25, -0.5. If the resulting "synthetic score" was bigger, then the independent directors and institutional investors "force" began to grow, the transactions associated manipulated by the controlling shareholders will also have more restrictions. Minus the 2007 score, with a score of 2006, the difference between the negative tendency to expand, to prove the influence of independent directors and institutional investors, which is what we want to see.
The results. Can be obtained by calculating the final difference negative 17 accounted for 43.6% of all subjects, showing that in 2007 relative to 2006, played some role in the independent directors and institutional investors on regulatory issues in the related party transactions, but The majority of listed companies has not improved, but backwards. 4 Conclusion
The third part of the calculation results show that the independent directors and institutional investors did not play a positive role in regulation of related party transactions. After careful analysis, we can know that 22 listed companies have not improved, or even retrogression. Which the company operates the particularity of the year there is a certain relationship, after all, the study only two reporting years, but we still have work to do in the regulation of related party transactions.
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