Analysis Of Split Share Structure Reform And Corporate Governance Based On The Theory Of Common Agency

Split share structure is a unique product of state-owned enterprise reform process in China, and a remained system defects. State-owned enterprises are the lifeblood of our economy. State enterprise reform has been an important economic proposition. State-owned enterprise reform has achieved remarkable achievements, but from 1999 to 2005, remained low behave in the stock market listed companies make a lot of equity incentive plan lost incentive effects. Many scholars believe that the split share structure problem is the source of the low efficiency of China's capital market, also is a major obstacle to the implementation of equity incentive in China. In order to maintain the good momentum of development of economic, April 29, 2005, the Commission issued "listed companies tradable on the split share structure reform issues related to notice", marks the landmark of China's securities market share reform launched. But the split share reform process met with the loss of state assets and the management buyout controversy. Particularly the manager-buyout problem makes the split share structure reform of state-owned enterprises met by the challenge. The purpose of this study is based on the common agency theory to construct models of state-owned listed companies, and make a fundamental understanding with multiple shareholders. The equity structure of the governance structure is based on the characteristics and significance of application. This will help people understand split share reform intellectually, and make important significance senses in promoting the reform.This study is based on the common agency theory, which developed on the theory of modern corporate governance principal-agent theory. Principal-agent theory is the most mature theory to describe and solve the corporate governance and efficiency improvement problem. One of the problems to solve is the owner of the corporate assets (i.e., residual claimer and residual controller) encourage the business producers and manager and design the incentive plans. Common agency theory is developed on the basis of the principal-agent theory: when there are multiple clients, analysis the agency balance and cooperation between the clients primarily. Therefore, the common agency theory is applicable on the multi-party state-owned shareholdings of listed companies problem, of which the governance structure and judgments analysis. This paper will base on the theory of classical and empirical research papers, and state corporate governance theory and common agency theory and related research findings, in order to continue the research on the basis of former state-owned listed companies analysis on problems of China's governance. Meanwhile, the research findings of the state-owned listed company governance analysis can be seen as a comparison of the conclusions later in the article.Under the analysis of the state-owned shareholdings of listed companies, the shareholders can be divided into the tradable shareholders and non-circulating shareholders, non-tradable shareholders are mainly contained state shareholders and legal person shareholders. The state-owned shareholdings of listed companies is a diverse party, the commission agency problem is a common agency problem. The target of state shareholders is diversified, as the different ways of holding costs and non-tradable shareholders and tradable shareholders, the targets of the shareholders are also different. Relationship between all the targets of the shareholders are complex and uncertain, some goals are complementary and some are relevant to the objectives of some poor, or even another alternative. The relationship of the goal of the shareholders, will have an important impact on the managers incentive. This article discuss the problem at the angel of multi-principal and multi-task, which is the impact of corporate governance of state-owned enterprises listed companies, build complete information and incomplete information common ageny models of the corporate governance, describe the state-owned listed companies agency relations. In common agency model with full information, we will build principal-agent model of state-owned enterprise, clear the maximization problem of shareholders and solve the equilibrium, and we will get manager effort level shareholders require and maximize income of the shareholders. Conclusion: the incentives shareholders make on the manager's depend on factor b j1, which is shareholder returns in the task, that is, the importance to the task of the shareholders; the holding shares of shareholders infect manager incentives and related to the ownership share of the larger shareholders is less keen to encourage managers to complete a task than relatived to the share of small shareholders; manager's effort level is related to the marginal cost, which means the relationship between tasks, so the shareholders of tradable shares caused inconsistent objectives, will lead the manager incentives lapsed, and the split share reform will improve the incentives.As the complete information assumption is not meet the conditions, so the next set up under incomplete information common agency model, closer to the reality of many shareholders and managers of common ageny relationship, principal-agent model with incomplete information discussion of whether the information can also be under the assumption of complete equilibrium of comparison, to determine the shareholders because the loss suffered by incomplete information. In the common agency model, incomplete information, not only between shareholders and managers of information asymmetry is also reflected in the number of asymmetric information between shareholders. Between shareholders and managers as information asymmetry, managers can independently choose effort level, the shareholders holding shares on the manager's efforts will not have a direct impact excitation. Manager's effort level and the task increases the incentive wage coefficient between the sum of the marginal cost of the task, and therefore incomplete information, the minority shareholders on the manager's incentive desires will be ignored. Under the split share reform, the reduction of state-owned shares and legal person shares, the introduction of strategic investors, the cooperate governance of listed companies will be improved. Meanwhile, the shareholders income coefficient is larger than incentive coefficientb >β, shows managers can not achieve the level under the full information in which case the shareholders requires, which means the "incentive contract" between the shareholders and the managers is worse than the "enforced contract ". In addition, there is incomplete information between the shareholders, the shareholders need to bear the cost of higher incentives, shareholders need to spend more wage payment to cover the manager's risk aversion to achieve revenue maximization. As the basis of interests among shareholders are different methods, stock split will lead to no cooperation between the shareholders, led managers to further encroachment on the interests of shareholders and corporate governance failure.In the conclusion section, the paper concludes with the research results exited, and compared with exited researches. Under the common agency model, it can be considered in a multi-task multi-principal agency relation firm, corporate governance, or the agent's incentive has the following unique features: state-owned shareholders of listed companies due to the dominance is not conducive to incentives managers; the correlation between the task shareholders delegate to manager will directly impact the level of manager's efforts and shareholder returns, asymmetric information between shareholders led managers to increase risk aversion, shareholders will have to increase incentive intensity. Finally, summarize the lack of article and put forward ideas for further research.