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Ownership structure, board characteristics and external guarantees of listed companies

Author: GongKaiSong LuChunRong Cao From: www.yourpaper.net Posted: 2010-04-11 10:53:19 Read:
Select 2004-2006 [Abstract] This article China's A-share listed companies as research samples, combined with the background of China's system, using multiple regression method, inspection of the ownership structure, the relationship between the characteristics of the Board and External Guarantee of Listed Companies. This paper provides evidence for the following conclusions: (1) the size of the Board of External Guarantee of Listed Companies U-shaped relationship, more appropriate to the size of the board of directors of listed companies in China about nine people; (2) the proportion of independent directors on External Guarantee of Listed Companies in China the possibility of no significant effects; (3) the proportion of shareholding directors of the listed companies, the size of the possibility of over-guarantee behavior the external guarantees ratio was negatively correlated; (4) The chairman of the board is also the CEO of the company, the occurrence of an over-guarantee large, the greater the proportion of occurrence of external guarantees; (5) state-controlled listed companies, the higher the proportion of the largest shareholder of listed companies, the smaller the possibility of over-guarantee behavior, the more the proportion of external guarantees small.
[Keywords] ownership structure; Board Characteristics; external guarantees

Introduction

In China, the listed company is relatively good asset quality company, in its capacity as guarantor can easily get the support of the bank credit funds, visible, external guarantees of the listed companies in China are universal. Guarantee as a kind of economic behavior, the normal economic phenomenon, listed companies can be convenient, quick access to bank funding, can reduce the risk of the transaction, to promote the development of capital markets. But now, in the practice of listed companies to provide external guarantees, disputes arising from guarantees and continue to occur. ST Monkey King since 2000 for controlling shareholder Houwang Group provides 3 billion in loan guarantees has been unable to repay the parent company jointly and severally liable to result in significant losses, ST Societe Generale, happiness Industrial Sanjiu Pharmaceutical, hops, etc. The number of listed companies have run into financial difficulties due to related parties huge security lawsuits and precarious. Security issues from the first listed company to become the largest shareholder of the "ATM", evolved to later listed company into a mutual insurance Circle "and listed companies frequently guaranteed subsidiaries, continue to highlight the negative impact of these acts of the listed companies. In view of this situation, China Securities Regulatory Commission and other departments has issued various regulations on security behavior, were used to the external guarantee behavior of listed companies. External guarantees of listed companies, however, did not disappear, but increased (Gao Lei, Song Shunlin, 2007).
China's listed companies why this phenomenon exists, guarantee behavior of listed companies by the factors which affect it? Many of our scholars believe that the internal governance of listed companies is an important factor affecting the guarantee behavior of listed companies (Chen Hong, 2006; Wang Yan, Lin small Chi, 2007). The company's shareholding structure and characteristics of the Board is an important part of the company's internal governance, has important implications for corporate governance, thereby affecting the behavior of foreign listed companies guarantee. Therefore, the two aspects of research in this article from the shareholding structure and the board characteristics on External Guarantee of Listed Companies in China.

Second, the theoretical analysis and review of the literature

(A) The theoretical analysis
Shareholding structure and corporate governance - the principal-agent theory
The principal-agent theory, corporate governance issues associated with the emergence of the principal-agent problem. Due to the existence of the agency relationship between the company's owners and operators, between the interests of inconsistent generates agency costs. Proprietorship enterprise, capital owners manage their own enterprises, there is no separation of ownership, there is no agency problem, naturally there is no agency costs (or small agency costs, such as internal agents), the smallest loss of corporate capital gains. With the emergence of the modern company, especially in dispersed ownership of shares in the company, the shareholders can not directly engaged in the business of the company, because the cost of doing so is too high, they need to hire a professional management personnel engaged in the operation. To operating personnel actions are consistent with the interests of shareholders to maximize managers need the necessary oversight, which resulted in the agency costs. The extent of the size of the separation of ownership and management rights of agency costs related to the degree of separation of ownership and management rights related to the degree of dispersion of equity or equity structure. More dispersed ownership structure, the greater the degree of separation of ownership and management rights, the supervision of the principal costs and residual loss possible that the higher agency costs.
Can be seen, rooted in the modern separation of ownership of the company and the degree of separation of ownership and corporate governance issues, while the latter is generally reflected directly through the ownership structure. Ownership structure embodies the basic content and nature of the corporate governance issues, is the core of corporate governance. And corporate governance have a direct relationship to the listed company's external security and other matters of day-to-day operating decisions. Therefore, the equity structure of listed companies will be listed on the company's external guarantees decisions have an important impact.
Board duties
The duties of the board of directors decided to board what should be done, who is responsible for, as well as any responsibility. Duties of the Board of Directors, two explanations: one is the principal-agent theory, the theory of a modern organization.
(1) The principal-agent theory
The principal-agent theory holds that the director is an agent of the shareholders, and they work to maximize shareholders' interests. Shareholders elect directors and managers delegate their voting rights to directors, directors hire managers operating companies and to monitor its performance, the main role of the Board is to assume fiduciary duties, supervision. Williamson (1986) pointed out that the agency theory and transaction cost theory of the Board of Directors as the endogenous control tools. If there is competition between managers, all controlled by the managers of the Board is the best board of directors. If there is collusion between managers, the board of directors should include non-executive directors to protect the interests of shareholders. Fama (1980), Fama and Jensen (1983), the Board is often seen as an oversight body to protect the self-interest of stakeholders from managers against.
(2) modern organization theory
Modern organization theory, the Board of Directors is a working group that performs a specific function, and strategic decision-making is the core of the work of the Board in order to ensure the scientific nature of the strategic decision-making, the Board should clear goals, clear division of science, duties, appropriate scale. The board's role is mainly reflected in two aspects: First participation in decision-making; fiduciary responsibility, to supervise the managers.
Tricker (1995) combine modern organization theory and principal-agent theory, put forward a theoretical framework to explain the nature and role of the board of directors, and outlines the impact of the Board of Directors of the basic elements play a role, including: the proportion of non-executive directors, board size, the total managers influence the function of the sub-committee.
External guarantees behavior must be an element of the decision-making of the Board, the the guarantee decision making related to the business therefore risks; outflow or not directly related to the business interests; whether or not related to the business value impairment. External Guarantee of Listed Companies normal or not, the quality is good or bad, with the board quality has very close ties.
(B) Review of the Literature
More normative research on the influencing factors of external guarantee behavior of listed companies, the last few years of empirical research article also began to be filed. In empirical research, scholars from the area of ??corporate governance, especially equity structure to study the behavior of listed companies in China's external guarantees more.
Wang Liyan, the small Chi Lin (2007) investigated from the equity structure of the listed company's controlling shareholder equity ratio, the proportion of the outstanding shares, the proportion of state-owned shares, and the proportion of foreign shares on the external guarantee behavior of listed companies. The study found that the equity ratio, the proportion of the outstanding shares of the company's controlling shareholder, and the proportion of state-owned shares will impact certain characteristics guarantee behavior is more complex, but the stake of the controlling shareholder and the influence of the proportion of outstanding shares.
Gao Lei, Song Shunlin (2007) found that the largest shareholder stake a significant negative correlation with related guarantees, equity inhibition of association guaranteed checks and balances did not play.
Wang Kun, Chen Xiao (2007) China's A-share listed companies from 1998 to 2003 related party guarantees data for the study, to examine the probability of occurrence of the related party guarantee of listed companies in different shareholding structure. The results show that with the increase in the proportion of the controlling shareholders of listed companies, listed companies in the probability of occurrence of the related party guarantees showing a significant increase in first, and subsequently was not significant, the last significant declining trend.
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