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Case study of the checks and balances and internal oversight about the shareholder structure of listed companies

Author: HanCongHui ShenLin From: www.yourpaper.net Posted: 2010-04-05 02:30:56 Read:
[Abstract] article northeast high speed for the study, the analysis of the relationship between the listed company equity checks and balances and internal oversight efficiency. Through the case studies, the equity checks and balances structure of listed companies may face competition for corporate control due to several large shareholders decision making inefficient the Internal Oversight dummy governance issues. Therefore, an effective innovation system and ideas to improve the efficiency of internal oversight need.
[Words] the governance; Shareholdres; internal oversight

Introduction

In recent years, as Enron, WorldCom, Yinguangxia represented by listed companies in the domestic and foreign securities fraud violations frequently exposure, corporate governance issues become a concern of theoretical and practical circles, research a hot topic . As an important issue in the corporate governance structure, ownership structure and the consequent equity checks and balances in the current corporate governance of listed companies in China are given more meaning, academia universal concern. Ownership structure can generally be divided into three types: First, the high concentration of shareholding, the company has a controlling shareholder, the shareholders of the company has absolute control over; the options highly fragmented, no major shareholder of the company, the ownership and management of basic complete separation; Third, equity moderately concentrated, the company has more than one relative controlling shareholder. Obviously, the high concentration of shareholding, the other shareholders is difficult controlling shareholder effective constraints and checks and balances, internal supervision and control of the checks and balances mechanism is difficult to get normal operation; equity is highly fragmented, often not directly proportional to the pay and benefits of monitoring costs, shareholders The enthusiasm of their lack of supervision and management; equity moderate concentration, the largest shareholder among mutual restraint, there is the power of supervision. Therefore, in theory, moderate concentration of equity will have shareholders' equity checks and balances between the effect can make more effective internal oversight.
Widespread equity of listed companies in China as an emerging capital market concentration is too high a phenomenon, "due to the dominance of the equity structure situation. A large number of analysts believe that a great deal of the negative effects of regulation and governance of highly concentrated give equity company. Shleifer and vishny (1997), that equity concentrated cause severe agency problem between large shareholders and minority shareholders; Du Ying and Dealing (2002) empirical studies have shown that higher equity concentration would be detrimental to the value of the company; Zhang The glorious and Zeng Yong (2006) analysis of the behavior of the controlling shareholders through tunneling (tunneling) on ??the transfer of assets of listed companies. Therefore, researchers generally believe that "due to the dominance of the listed companies in China is one of the major cause of the problems of corporate governance, improve the corporate governance of a prescription is to break the shareholding structure of the highly concentrated, stranded with large, the formation of the checks and balances of the options, in order to ensure not against the interests of the listed company and other shareholders.
At present, more and more researchers tend listed company's governance structure should share balancing system that This is to supervise the operating efficiency of the managers, but also to prevent the the largest shareholder tunnel behavior is an effective distribution of power and internal oversight mechanisms. However, I believe that the listed companies is a "scarce resource", so the case Shareholdres listed companies, each of the major shareholders tend to exist less equity to draw on the economic resources of many other large shareholders may and trends. Authority in order to safeguard their own interests, the Board of Directors, managers often will become the focal point of major shareholders, the competition for the inevitable give the company a huge waste of economic resources and the inefficiency of the internal oversight mechanisms. I tried to use the case studies, research methods, new thinking on the relationship between the equity balance and internal oversight. Northeast high-speed (stock code 600003) is the implementation of special treatment for a typical case. The analysis revealed that effective checks and balances of equity and not rely solely on the simple increase of the proportion of the largest shareholder. For an equity balance of positive role into full play, the system construction, effective internal constraint mechanism and all need to carefully consider. In addition, an important measure to improve relevant laws and regulations are also effectively protect the interests of investors.

Northeast high-speed basic overview

The Tohoku Expressway certainly recorded in the history of China's securities market, in July 2007, it became a listed company of China's A-share market, the first is not due to the loss of ST. Is difficult to imagine that such a state-owned background and strong profitability of listed companies will be the implementation of the ST, the likely explanation is that the company there is a major problem in terms of governance structure, internal supervision. Therefore, the author from the point of view of the equity of checks and balances and internal oversight them study.
The northeast high speed under the State Council on the proposed use of the market to solve the lack of highway construction funds, a joint venture set up by the relevant departments of the provinces and cities, initiated the establishment of the Heilongjiang Province Expressway Company, Jilin Province Highway, Huajian Transportation Economic Development Center, the three companies registered in Changchun City, Jilin Province. Tohoku Expressway is the first proposed by the State Council established four main business carried for road development, maintenance, such as one of the listed companies, the company's current daily average of 200 million in cash credited to continuous strong profitability (financial data are shown in Table 1).
(Data from Xenophon listed companies' financial database)
Northeast high-speed main assets and sources of income as a "two-way bridge": the long flat road, Kazakhstan Parkway and the Songhua River Bridge. The "two-way bridge" Northeast high-speed three shareholders injected assets, three shareholders based on the amount of investment in the project to determine the number of shares held by the Tohoku Expressway. The composition of the equity distribution of the Tohoku Expressway and the company's senior management, such as shown in Tables 2 and 3, respectively.
From Table 2, Table 3 shows that shareholders are of the Northeast high-speed inter-provincial inter-departmental grouped together, the distribution of the company's assets across Heilongjiang and Jilin provinces, dispersed ownership belongs to the Ministry of Transportation and Communications Huajian Transportation Economic Development Center The highway between the two provinces, no an absolute controlling shareholders. This ownership structure is a typical manifestation of equity moderately concentrated equity mutual checks and balances between the major shareholders. On the surface, the advantage of this innate institutional arrangements give Northeast high-speed development guarantee the Northeast high-speed operating completely independent, free from the interference of each shareholder, to fully protect the interests of the company. However, due to the inter-provincial distribution of allocation of economic resources of listed company does not have an absolute controlling shareholder of the company, Northeast high-speed Since its inception on implied enormous risk management.

Third, the case studies

(A) control of the fight
Holdings the right to determine the control of the company, many scholars believe that outside blockholders allows the company to get rid of the control of the controlling shareholders, effective avoid the major shareholders the encroachment and transfer its assets in the balance of power, in favor of the company to ensure that small and medium-sized shareholders' interests are not violated. In fact, the shareholding structure of the balance mode still not be able to avoid the big shareholders through a variety of means to get as much control over the infringement of the rights and interests of other shareholders. Largest shareholder compete in the senior management of the company on behalf of the seats is one of the most direct and most effective means.
Northeast high-speed manage risk in its listing of just a year starting to manifest. June 29, 2000, on the high speed of the Board of the Northeast, the general manager Zhu Jiyuan bypass its allocation of funds, the former chairman of the board, high-speed, general manager of Heilongjiang Zhang Xiaoguang suddenly orally proposed the removal of all the members of the team manager. A director of the Heilongjiang high-speed aspects of the four directors and Huajian Centre agreed to a waiver, Jilin high-speed 3 directors oppose the final dismissal of the motion was passed. However, 10 days later, from northeast Jilin high-speed high-speed vice chairman and general manager of Zhuji Yuan said in a statement, before the "Board never issued written material is an offense to refuse the above-mentioned decision of the Board of Executive Directors". On July 26, the Northeast High-Speed ??Board meeting, maintaining the previous resolutions of the board of directors and decided to recruit general manager. But because of wrangling between the major shareholders, the resolution failed to be successfully implemented. Stalemate after one year, the the northeast high speed parties reach a compromise, Zhu Jiyuan resume their positions, but a month after its own resignation. Therefore, for a long time due to the the personnel struggle northeast high-speed no post of general manager of Northeast high-speed investment, during this period, a lot of non-core business, basically all the losses. In July 2005, high-speed Northeast, chairman Zhang Xiaoguang was arrested because of corruption, difficult to form a more consistent views between the major shareholders of the Tohoku Expressway, the chairman of the board seats since been vacant. Northeast high-speed board presented a non-normal operation of the state, a majority of the directors serving extended.
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