Research On The Agency Problem Of Controlling Large Shareholder In China’s Listed Companies

According to the modern corporate governance theory, ownership structure is thelogical starting point of corporate governance issues. Different ownership structurearrangement can produce different agency problems. On the international scale, there aretwo different types of ownership structure and corporate governance issues: one isdecentralized equity structure. The core of corporate governance is to solve the agencyproblem between shareholders and managers.Another is relatively concentrated ownershipstructure. The core of corporate governance is to solve the controlling agency problemsbetween large shareholders and minority shareholders, which is also known as "the secondagency problem". Early research of corporate governance issues mainly focus on agencyproblem between shareholders and managers due to high dispersion equity. In recent years,with the coming of the latest evidence of the highly concentrated ownership structure, thecontrolling shareholders’ agency problems become the focus of corporate governancestudy.Most of the listed companies in China is established by the original state-ownedenterprises through restructuring. Therefore, holding big shareholders of listed companieshave the side of “paternalism ", also have the deprived side of empting the resources andencroaching on the interests of minority shareholders of listed companies. But at present,the study mainly focuses on controlling the hollowed behavior of major shareholders, andthe literature study of combining "empty" and "support" of the big holding shareholder arerare, especially the relatively slow development of the related theoretical model. Therefore,through building the unity of analysis model of "empty" and "support" of holding bigshareholder, and carrying on the empirical analysis, this paper helps to explain thecontrolling shareholder agency problem in a reasonable manner, and provide the relatedtheoretical guidance.First of all, the institutional context of China’s controlling shareholder agencyproblems were analyzed in this thesis.On the basis of literature research and theory, theownership structure of listed companies in China were studied from the perspective of institutional change. Since most of our listed companies are state-owned enterprisesthrough the establishment of joint-stock reform, dominance of state-owned shares has anatural system background. And this phenomenon still has not changed even after thebasic completion of share segregation reform. State-owned shares not only dominated,highly concentrated, and have the absolute control with pyramid structure.Secondly, the thesis have a theoretical analysis of our controlling shareholder agencyproblem. In accordance with the number of controlling shareholders, listed companies inChina are divided into absolute control of the company by single largest shareholder andcompanies jointly controlled by several large shareholders, and the latter is furtherclassified as checks and balances of non-controlling shareholders over controllingshareholders, as well as conspiracy between controlling shareholders and non-controllingshareholders. On the basis of the classification, the thesis establishes the agent modelunder the cases of absolute control by single largest shareholder as well as joint control byseveral large shareholders. And the thesis also analyzed investors legal protectionmechanisms, the controlling shareholder equity ratio, hollowed out of the controllingshareholders by equity concentration variables as well as the impact on the value ofcompanies, and at last conclude propositions.The thesis has game analysis of controlling shareholder agency problem in China’slisted companies. In China’s special system context, the controlling shareholder agencyproblem will exist for a long time. Independent directors, as an internal regulatorymechanisms, has been at a disadvantage in the process of having a game with controllingshareholders, and has not play an effective role. Income levels, especially the reputationof the independent directors, must be raised in order to improve the efficiency and realizeseparating equilibrium of independent directors market. The monitor intensity of theregulatory authorities is subjected to the double impact of the regulatory revenue andregulatory costs in the game between external regulatory authorities and the controllingshareholder. We must improve the income reputation of the securities regulatoryauthorities in order to improve the regulation effectiveness of the securities regulatoryauthorities, thereby increasing the probability of regulatory.Finally, the thesis has an empirical test on the controlling shareholder agency problems of listed companies in China.It takes China’s Shanghai and Shenzhen listedcompanies in2009-2011as samples, using the SPSS statistical analysis tools,and has anempirical test on the proposition in the theoretical analysis and the conclusion of gameanalysis with analysis method of Multiple Linear Regression.At the same time, based onthe above conclusions, this paper puts forward suggestions and policies to solve theproblem of holding large shareholders in China’s listed companies.