Corporate Governance Mechanism And Big Shareholder's Tunneling

The Chinese economy is undergoing profound changes nowadays. At such a sensitive stage, the profits of small and medium-sized shareholders are expropriated by large ones due to the loophole of legal protection for investors, which plagues the newly born Chinese security market. Through various ways such as self-dealing transaction, the gigantic shareholders expropriate the dividend of small and medium-sized ones. Consequently, such practices have jeopardized the sound development of China's listed companies and the security market as a whole.This paper has especially analyzed the problem of expropriation by large shareholders of public corporations on small and medium-sized investors and the influence on the selection of corporate governance mechanism. Through the qualitative and quantitative analysis, we find how large shareholders expropriate the listed companies through the arrangement of corporate governance mechanism. On the basis of the model, we find that large shareholders prefer to employ less board members or independent directors. Second, they do not select'big four'to audit. What is more, they often lure the executives through high salary.To restraint the expropriation, there used to be two ways:First, improve the corporate governance which focuses on perfecting the function of the board of directors.Second, strengthen the legal protection to minority stock holder from legislation, the administration of justice and enforcing the law.