The Influence Of Private Benefits Of Control On Corporate Value

Wider dispersion of stock ownership was a common form of corporations, and the Client-Agent between shareholders and managers became the basic research programs in corporation governance. But with the concentration of stock ownership, the agency problem between large shareholders and minority shareholders which caused tunneling by the large shareholder became the main conflict in corporate governance and the focus of relative researches.Private benefits of control implied the interest tunneling by controlling shareholders to minority shareholders. The tunneling by large shareholders has been paid more and more attention by the whole society. In perspective of the related researches,Capital investment is one of the main sources of private benefits of control . Therefore, this essay analyzes the effects of private benefits of control on corporate value and the role of capital investment in this course from the investment perspective.Considering the characteristics of the financial policies and governance structure of listed companies in China, this essay firstly reviewed the current researches about private benefits of control both foreign and domestic, and analyzed the relationship among private benefits of control, investment and corporate value theoretically based on the information asymmetry theory and agency theory, and collected 218 sample data of listed companies in Shenzhen and Shanghai Stock Exchange from 2004 to 2009, and study the effect of private benefits of control on corporate value. Furthermore, we introduced the cross term to reflect the role of capital investment in this process. The results showed that private benefits of control and corporate value hold out over U-shaped characteristics. Specifically, when the control premium level is below normal, the private benefits of control has no obvious influence on corporate value, and when the control premium level is normal, the private benefits of control has positive influence on corporate value, and when the control premium level is above normal, the private benefits of control has negative influence on corporate value. Capital investment acted as a catalyst in the whole process, and in order to get the private benefits of control, large shareholders form the controlled resources mainly by capital investment.Based on the results of empirical research, and considered the current situation of Chinese listed companies, this essay puts forward relevant policies and measures suggestions, and could be beneficial to the improvement of laws and regulations in China capital market, to limit the tunneling of large shareholders of listed companies , to optimize business decisions of corporation, to promote the healthy development of capital markets, and to assist the furtherance and improvement of corporate governance in China.