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To limit Ways largest shareholder Expropriation

Author: LiuMengZuo ShenZhongHua YuNuTa From: www.yourpaper.net Posted: 2010-04-08 00:18:44 Read:
Paper Keywords: large shareholders occupation cash dividend restrictions pathway
the paper Abstract: - the relative concentration of the equity of the company, shareholders will make use of the control of the company appropriated interests of small shareholders. The largest shareholder encroachment with a variety of forms, cash dividends in China's stock market has also become an important form of encroachment by the largest shareholder. In the conditions of the split share structure, due to the dominance and equity checks and balances are not an effective solution to the large shareholders occupation, to protect the interests of small investors is another way to limit shareholders' occupation.
, of the problem
(A) foreign shareholding concentration analysis Berle and Means (1992) noted that the dispersed ownership is common in the United States, the ownership of capital is widely held in a large number of small shareholders, and the control rests in the hands of the operators. Murnane far-reaching effects prompted a lot of managers' advocates the research literature, professional managers responsible for the operation of the company to become an important feature of the modern company. However, Demsetz (1983), Demsetz and Lehn (1985), Shleifer and Vishny (1986) study showed that even the largest U.S. companies, there are also moderate concentration of ownership. LaPorta et al (1999) using the company's data of 27 rich countries, by identifying the ultimate controlling shareholder of these companies (Ultimatecontrollingshareholder) found that in addition to very good shareholder protection outside the country, relatively few firms with dispersed ownership. Some rich countries, such as Germany, Japan, Italy and seven OECD countries, showed a significant concentration of ownership; characteristics of some emerging market countries, the concentration of ownership of the company is more obvious.
Claessens et al (2000) investigated the 9 East Asian countries 2980, found that more than two-thirds of the companies controlled by the single largest shareholder. The conclusions of these studies show that the relative concentration of the company equity is a common phenomenon worldwide. When the relative concentration of the equity of the company, shareholders have the motivation and ability to exercise control over the company, if the different objectives of large shareholders and minority shareholders, major shareholders will use its control of the company, transfer of company resources to achieve their own goals, which harm the interests of minority shareholders, so the contradiction between the majority shareholders and minority shareholders become the main source of ownership concentration proxy conflict of interest. Johnson et al (2000) uses the term "tunnel (tunneling) to describe the controlling shareholder of the company to benefit from the company to transfer resources behavior. In emerging markets, due to the imperfect corporate governance mechanism, "tunnel" behavior may be more serious. Major shareholders use their control over the transfer of company resources, the behavior of the "tunnel" to the detriment of the interests of small shareholders and employees, a new principal - agent problem, called shareholders occupation (Largeshraeholdersexpropriation).
(B) of listed companies in China focus on characteristics of 2001, 84% of China's listed companies are still directly or indirectly by the government ultimate control, of which 8.5% of listed companies remained under direct government control, 75.6% of companies by the State through the pyramid holding the implementation of indirect control. The same time, China's legal and judicial system is more a lack of protection for minority shareholders, the degree of ownership concentration is quite high, often act as a major shareholder and the controlling shareholder of the role of government or legal institutions, therefore, China's state-owned listed company's largest shareholder and minority shareholders of the conflicts of interest between more complex than in other countries. Tangzong Ming Chiang bit (2002) bulk equity transactions premium research results show that: in the Asian countries and regions, the minority shareholders of listed companies in China against level similar to that of Indonesia, less than Thailand, the Philippines, South Korea, but far higher than that of Japan, Singapore, Hong Kong and other countries and regions. Therefore, research companies in the market's expropriation of great significance for improving corporate governance, and solve corporate agency problem. Listed companies in China, due to the social, political, economic and many other reasons, the state-owned shares "dominance" phenomenon is very prominent, all countries, through direct ownership or ultimate control of the majority of listed companies. The same time, the late start of China's securities market mechanism is not perfect, the lack of effective legal protection of minority shareholders, the presence of large shareholders occupation of the interests of minority shareholders basis in reality. The different forms of encroachment by the largest shareholder of this study and the Solution, the reference listed companies in China.
the largest shareholder encroachment manifestations Research
(A) foreign research major shareholders tend to seek control of the company and minority shareholders share control of the private benefits. Largest shareholder of the right to control access to the private benefits of an embezzlement has a variety of forms. Shleifer and Vishny (1997) cited the encroachment of the following type: privilege consumption, reinvestment of cash flow in the preference for the irrational expansion of the project, no longer qualified for the behavior of company operations are still reluctant to take over eager for power and position. LaPorta et al (2000) also gives several types of encroachment: complete theft of the transferred assets, the internal issue of shares diluted external equity, excessive remuneration, at preferred prices to sell the company's assets to own or control or sold to other entities they control the transfer price. Faccio et al (2001) studied Business Group in Europe and Asia to seize the benefits of quantitative evidence, given in two forms: internal people choose to invest in low income or negative income items, because they can have the opportunity to seize the benefits of; family are related party transactions within the control of the business group, and had invaded the interests of minority shareholders. Above forms of encroachment is more or less in the different national companies, but because of the different legal, institutional and other aspects of the different countries occupied by the largest shareholder of specific forms there are also differences.
(B) the domestic research the Han Dezong and Ye Chunhua (2004) (state-owned) listed companies in China occupied by the largest shareholder manifestations grouped into the following areas: the use of related party transactions to transfer profits to the parent company or its holding subsidiaries, such as the parent company to the listed company high-priced to sell low-quality assets, or listed company for sale cheap quality assets to the parent company; the illegal occupation listed companies huge amounts of money on behalf of the listed companies various guarantee and malicious financing; executives of listed companies (generally appointed by the largest shareholder) unreasonably high salaries and special allowances; the transfer of control of the event and the secondary market speculators joint insider trading. Jiang Guozhou (2005) lists the major shareholder occupation of the means of small shareholders: twisted dividend policy, non-fair related party transactions, the investment behavior of seeking to maximize their own interests, cronyism, excessive Job consumption, non-standard information disclosure, market manipulation and restructuring Rubik's Cube. He Dan and Zhu Jianjun (2006) analysis of the encroachment on the interests of minority shareholders in the split share of institutional arrangements, the controlling shareholders equity financing. Liu Shao Bo (2007) deconstructs the interests of major shareholders structure, the substance of the expropriation is to grab the super control benefits. The specific form of ultra-control benefits generally include: major shareholders funds of the Company and its other's company used; largest shareholder is mandatory for listed companies to other companies to provide security of their's; transfer the greatest interests of listed companies through related party transactions under the shareholders of other companies; shareholders through various covert ways to grab profits of listed companies; funds to invest in free to change based on the interests of major shareholders of listed companies; transfer of benefits to shareholders through other means. Largest shareholder occupied many forms, involves many aspects, as long as it is the major shareholder with control over personal gain, encroaching on the interests of minority shareholders, all belong to the areas occupied by the largest shareholder. Limit the encroachment of large shareholders, cash dividends play an important role, because it makes the company gains transferred to the hands of investors, large shareholders can not use these activities benefit Brix. However, due to China's stock market is "the same rights and benefits different price" equity split phenomenon, the largest shareholder holds a lot of the same rights and benefits the price of non-tradable shares, resulting in the excess return will be incentive to hold a large number of non-tradable shares the controlling shareholder dividend way of a cash dividend to shareholders of tradable shares looting. Thus, in the high concentration of shareholding of China's stock market, cash dividends become an important form of encroachment by the major shareholders, major shareholders cash dividends encroaching on the interests of minority shareholders events have occurred. Chen Hsin-yuan et al (2003) studied the case of Foshan lighting and found that high cash dividends did not increase the value of the company, mainly due to cash dividends may be the tool of major shareholders to transfer funds and do not reflect the interests and aspirations of the small and medium investors. The original red flag (2004) lists the shares of Wuhan Iron and Steel and Chengde Lolo case may appear more cash dividend payment of public shares occupation more.
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