An Analysis Of Agency Problem Between Controlling Shareholders And Minority Shareholders Of Listed Companies In China

The main researching subjects in traditional principal-agent theory are the British and American listed companies, which shares are highly dispersed. So, the researching focus is the benefits conflicting between managers and all shareholders. However, many proofs indicate that the shares structure of the listed companies is very centralized, and controlling shareholders exist in the listed companies in many new market economy countries. The controlling shareholders have most of the shares, and they have enough rights to control the listed companies and get benefits for themselves by affecting the company's decisions. All of these can indicate that, the benefits of all shareholders of listed companies are not equal, and the agency problem between controlling shareholders and minority shareholders is very serious.The postulate of appearance of agency problem is the separating of control rights and cash flow rights. For the separating of control rights and cash flow rights, control rights are usually bigger than cash flow rights. Controlling shareholders can make some great decisions of the listed companies with very low costs. Controlling shareholders solely enjoy the benefits from transferring firm resources, but all shareholders bear the costs of the opportunism behavior. Controlling shareholders can take the following three ways to separate control rights and cash flow rights: pyramid structuring, intersect shares-hold structuring and dual-class shares structuring.The agency costs of controlling shareholders, which mainly represent the inefficiency of the decisions of investment, scales of enterprises and the transferring of control rights, finally lead to the lost of the value of enterprises. The capital structure in Chinese listed companies has the significant influence to agency costs. The percentages of the shares hold by large shareholders significantly correlate to return of net assets and return of total assets. Specially, the percentages of the shares hold by large shareholders and return of the net assets have U-curve relevant relation, and the government efficiency of shares hold by corporations is obviously higher than state-owners'.In China, the controlling shareholders in state-owned companies usually are the government, and private companies basically are the individuals or households. Being lack of mechanism to restrict the large shareholders in the operation of the companies, the agency problem is very serious. The ways that the listed companies used to violent the benefits of minority shareholders include replacement of shares and control rights, illicitly occupying the assets of listed companies, and manipulating the prices of stocks, etc.Share splitting is the institutional reason that controlling shareholders steal wealth of minority shareholders. In order to govern the agency problem between controlling shareholders and minority shareholders, and protect the benefits of minority shareholders, we may take measures as follow: continuing processing reform of share splitting, improving the capital structure and corporate governance structure of listed companies, forming mutual restricting system and independent director system to restrain the rights of large shareholders, principle of"defense proof"in judicial cases, and strengthening the supervisory function of intermediaries.