Research On Causes Of Corporate Control Market Failure And Its Consequences

With the implementation of Non-Tradable Shares Reform of Listed Companies and Administration of the Takeover of Listed Companies Procedures in 2005,M&A activity in China have been relaxed and stock market has begun to move into the era of full circulation,which is considered to further activate China’s corporate control market.Besides,more and more competitions for ownership of listed companies in 2015 has also shown that corporate control market in China tends to be increasingly active.In the western theory of corporate control market,competition for corporate control and takeover can play an important role in external corporate governance and reduce agency problems.However,this is not the case for listed companies in China.Many scholars have discovered that the transfer of corporate control cannot continue to bring good performance at present.Therefore,it is significant to study the reasons that affect corporate control market failure in China and what consequences it will cause.This paper discusses the performance,causes and economic consequences of corporate control market failure through traditional research and case study.Based on the theory of agency problem and corporate control market,the author manages to point out the mechanism through which the corporate control market operates.After a case study of Jinggu Forestry,the following ideas are found.First of all,in my opinion,main performance of corporate control market failure was as follows.on the one hand,after outside competitors have acquired shares,they fail to settle in the board of directors and improve the corporate governance structure.On the other hand,the power balance of ownership structure formed by outside competitor has not played a good role in supervision,and Insider Control problem is still serious.There are three reasons for the above results.Firstly,there are internal governance problems of the company,which are embodied in the anti-takeover defense of Company Articles of Association,the loss of independence of the supervisors and the audit committee and the deficiency of supervision of the state-owned shareholders.Secondly,Negative actions of minority shareholders also resulted in the weak supervision power of outside,making the crucial election of the board of directors failed by a weak voting difference.Thirdly,the deficiency of legal protection of non-controlling shareholders directly makes corporate control market mechanism failed to work.In addition,this paper finds that in the case of corporate control market failure,whether it is the short-term market effect or the company’s long-term performance,consequence is definitely negative.Because the company’s inefficient management structure and the negative supervision of shareholders did not get improved at all.Finally,based on the research conclusions,this article puts forward some specific suggestions.The expected contributions of this research lie in two aspects.Firstly,the existing research fails to combine institutional background to explore the different consequences of corporate control competition.Therefore,this topic combines the institutional background and market environment of China’s listed companies to discuss the performance and cause of corporate control market failure,and what are the consequences? In today’s increasingly active corporate control market in China,it is very meaningful.Secondly,most existing researches are based on empirical studies on how corporate control competition affect corporate performance,which is inevitably limited to judge the market efficiency for corporate control.Because the corporate control market mechanism is complex and involves many factors.This paper focus on case study from the micro perspective,with analysis of short-term effects and long-term performance,which hopes can enrich the literature on corporate control market failure.