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Listed companies corporate governance evaluation index system based on the protection of small investors

Author: LiaoZuo DiShuPing From: www.yourpaper.net Posted: 2010-01-10 06:14:05 Read:
Abstract: Based on the separation of ownership and corporate governance focus on solving between the interests of the target company owners and operators inconsistent, highly concentrated ownership structure of listed companies in China are prone to lead the new agency problem - the controlling shareholder of the small and medium-sized infringement of the interests of shareholders. Therefore, theoretically constructed based on the shareholding structure of the relative / highly centralized corporate governance analysis framework, and the establishment of evaluation index system of corporate governance based on the protection of small investors, not only useful complement to the theory of corporate governance, and to provide investors the basis of a system of evaluation.
Keywords: corporate governance evaluation index system of small and medium-sized investor protection

Introduction

Modern corporate system due to the presence of the separation of ownership and control of the agency relationship, leading to the inconsistencies of the target of interest between company owners and operators, and therefore leads to corporate governance issues. Western traditional principal-agent theory is essentially a single principal-agent theory, its governance of listed companies to dispersed ownership as the main feature for the Anglo-American majority build an analytical framework. However, many countries and regions, including China, the ownership structure of most listed companies are not dispersed ownership, but relatively concentrated or highly concentrated; and Raian (1992), Weinslein Yafeh points (1994), Franks & Mayer (1984) of Shleifer & Vishnv (1997), Pagano & Roell (1998), more than of Johnson & LaPona elal (2000), Cheung & Chan, (2004), etc. are varying degrees to reveal the company concentrated or highly concentrated in equity relative , the very existence of a controlling shareholder or shareholders malicious encroachment phenomenon of the interests of minority shareholders.
Equity relatively concentrated or highly concentrated as the main feature of listed companies, there is the double principal-agent problem: one is the principal-agent problem between controlling shareholders or shareholders and managers, and other small and medium-sized shareholders The principal-agent problem and its agents are among the largest shareholder. Listed companies of China's securities market is highly concentrated, even if the equity division for a long period of time after the reform, the characteristics of concentrated ownership still evident, therefore, about the corporate governance structure and design of the governance mechanisms and arrangements should be mainly maintenance of small and medium-sized investments those interests.

Second, based on the small and medium investors to protect the corporate governance analysis framework

(A) the shareholding structure of the corporate governance and the small and medium investors to protect
The separation of ownership and control constitutes a logical starting point of the analysis of corporate governance, the separation of ownership and control (concentrate) the extent determined by the different shareholding structure, which determines the different corporate governance structure: highly dispersed in the equity shares of the ownership structure under any single shareholder or shareholders of a collection of the company's managers can not exercise control over the control of the company from the shareholders' transfer to operators, the company as rational economic man (homo economiCUS) operators, in pursuit of their own utility or benefit the goal of the next action, when the conflict of their interests with shareholders or the interests of the company, the operator may be set for their own interests and the interests of the shareholders or the company the expense, resulting in the first level of the agency problem.
Concentrated shareholding structure, the company control over the manipulation is usually in the hands of a few, who may belong to the same family members, or the meantime has very close relations of cooperation so that the equity interests converge. Usually in large listed companies, the acquisition of such control is not necessarily more than 50%, sometimes only 20% to 30% of the shareholding ratio. Control over saving investment can also take the following means: (1) pyramid shareholding structure; (2) cross-shareholding structure; (3) to give different voting rights of the shares (class share structure).

By the principal-agent theory point of view, when ownership and control belong to different interest groups, which control is concentrated in the hands of a few operators can reduce agency costs, enhance the value of the company to enhance. However, such a minority shareholding structure of a control in reducing agency costs, and promote long-term business strategy, but also lurks another serious problem of moral hazard, which generate new agency costs, mainly for controlling shareholders for against the interests of the other shareholders. Specific performance: (1) controlling shareholder may make unfavorable, but on its own business strategy: (2) to expand its control authority, the controlling shareholder does not dispatch or limit the amount of the earnings distribution, improper expansion of enterprise scale; (3) the transfer of the right to operate, to help the company enhance the value of the controlling shareholders will continue to resist the transfer of operating rights. Therefore, when the concentration of the company's shareholding structure, protection of minority shareholders, rather than enhance managers responsibility to become the most important issue of corporate governance.
Concentrated ownership structure, constituted by a number of major shareholders in the form of checks and balances is conducive to weaken largest shareholder interests against small investors. Equity checks and balances which means the control of the share by several large shareholders, makes any shareholders alone can not control the decision-making of the enterprise through internal interests contain suppress internal Pillage equity arrangements, mutual supervision, to achieve the largest shareholder. Laeven and Levine (2004) empirical study found that only when the second largest number of shareholders with the largest shareholder number of very different enterprise value to rise with the increase in the number of the second largest shareholder Maury and Paluste of (2005) with the Finnish listed company data to test similar conclusion: major shareholders equity distribution is more balanced, the higher the performance of the enterprise. For family businesses, the conclusion is more significant.
As an important participant of the checks and balances of the equity, institutional investors (such as securities companies, investment companies, securities investment funds) is a powerful force. Participation of institutional investors in corporate governance, including: (1) dialogue with the company; (2) the exercise of the right to vote; (3) appoint directors; (4) initiated a competition for control of the company the right to struggle. Due to the large proportion of institutional investors holding, it is easy to get information than individual investors have a distinct advantage in the oversight of the company's managers, its oversight income is higher than the costs of monitoring, able to overcome the problem of collective action. (B) The rights of shareholders of the corporate governance and the small and medium investors to protect
1, shareholder participation in corporate decision-making powers. The shareholders are the stakeholders of the company's equity, ought to have the the corresponding basic rights and equity share. First, as the owner of the company, shareholders should have the power to participate in the company's decision-making, but taking into account the cost of decision-making, making company decisions should not be made collectively by all the shareholders, for some important matters, such as the formulation of the Articles of Association of the Company, modification, merger, division, for election as directors and other matters, shareholders have the right to participate in decision-making.
2, the shareholders' right to vote. Shareholder decision-making power is actually exercised their voting rights, while the general meetings of shareholders' voting rights to achieve the basic way. Important general meeting of the rules of procedure and decision-making procedures for the protection of shareholders' voting rights, including: the convening of the shareholders' meeting, a shareholder proposal system, commissioned by the voting system for the election of directors system, these aspects of the design and specified reasonable directly determines the shareholders' voting rights exercise effect. For the exercise of the voting rights of minority shareholders, the ownership share is smaller, dispersed ownership, shareholders may not participate in the general meeting, the enthusiasm of the exercise of voting rights, and the views of shareholders may not be consistent with each other to form a strong consensus, so the establishment of the right to vote, the Collection System of minority shareholders to express their views, to provide effective and convenient way to exercise voting rights. For the implementation of the right to vote, the Collection System should ensure that information publicly, strict supervision and avoid become the tools contention of the company the right to operate.
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