Empirical Study Of China's Legal Protection Of Small Investors

Corporate governance should be a mechanism that can ensure the supplier of funds take back a reasonable return on investment. Strengthening legal protection is a fundamental measure to improve the corporate governance structure. For many years, China's capital market there is a unique phenomenon : one-third of the shares in circulation. two-thirds of the shares in circulation. The same ownership, circulation shareholders that the price is about 10 times the circulation of shareholders. We often say this is the equity division. It is this flaws of system design led to the phenomenon of listed companies against the interests of medium and small investors have occurred frequently. Small investors in the course of historical development of China's securities market has always been an important and indispensable participant. By the end of August 2004, China's stock market listed companies has reached 1,380, and market value of 3.9031 trillion yuan, the number of accounts opened by investors has reached 71.644 million households, Most of them are the small and medium-sized investors. Whether their interests can be protected is not only related to the stock market confidence but also related to the long-term and steady development of stock market. Generally speaking, legal protection of small and medium-sized investors in the securities market and financing activities of listed companies also experienced a gradual improvement of imperfect .The process supply a typical sample to study the extent of impact the law on the protection of small and medium-sized investorsBased on previous research, this paper uses the index that reflect development of the capital market to describe degree of protection small and medium investors, so use a total of 98 state laws. administrative regulations and departmental rules and regulations from December 1990 to December 2003 as objects of study. And use Canonical Correlation Analysis Method to study the role of our laws in protecting the mall and medium-sized investors.This paper is divided into four chapters. The first chapter reviews the development of China's legal protection of small investors. over the past 15 years of the development of China's securities market, there are four landmark event.: (1) Deng Xiaoping's southern tour in January 1992, affirm the effect of the stock pilot; (2) in July 1994 promulgation of the "Company Law", and with promulgation of three policy on rescue the securities market; (3) in July 1999 promulgated the "Securities Act"; (4) in June 2001 the promulgation of the measures of the reduction of state-owned shares. This our landmark divide the development of China's securities market into five stages .We can see the impact of legal protection of small investors on China's securities market. In this chapter we also have done a review and comments on the study at home and abroad of protection of small and medium-sized investors and raise the characteristics of this study.Chapter 2 analyzes the factors that affect the protection of small investors. The logical thinking abroad about the protection of investors can be summarized as : Investor Protection depend on the legal system and law enforcement, which in turn stemmed from a variety of sources of law. that is the source of law decide the level of protection of investors. The protection of investors would directly affect the mode selection of a country's financial system. Financing and ownership structure decide corporate governance, corporate governance impact on the standards for company value and capital market development .Therefore, we have chosen the index that can reflect the level of development of the capital market and stock returns and other indicators to describe the protection of small investors degree. We also analyzed the impact of market volatility and dividend yield rate on the protection of small investors.As the focus of this paper, Chapter 3 made a empirical analysis. Based on the theoretical analysis of Chapter 2, this chapter make two variable groups, The first variable group is made up of seven indicators that reflect the level of protection of small investors ,The second variable group is made up of scores of legal protection, the explanatory variable and economic growth stock yield and other indicators as a control variable; Then use canonical correlation analysis to describe the correlation between these two variable groups. With the compare with Standardization of the variables and the analysis of the coefficients and the typical load factor, we can see the legal protection have apparent positive influences on small and medium-sized investors, dividend payments of listed companies on the protection of small investors are also positive, but related mainly to the indirect effects.Chapter 4 summarizes the results of this study, based on findings of empirical research we give some policy recommendations. Improve the legal system to protect investors and make it effective operate ,it will certainly promote the of the securities market to mature faster and better. Investor protection is a comprehensive, systematic work, which needs the efforts of legislative and judicial branches. law enforcement and financial regulatory authorities and investor.