Research On Chinese Listed Companies' Private Benefit Of Control And Capital Investment Relation

Most of Chinese listed companies reformed from state-owned enterprise and run under special institution. In order to maintain the dominant position of public ownership, the state have controlled most of the shares of listed companies and rights of business decisions as large shareholders on the actual. However the situation of high concentration of shares in our country offers large shareholder the possibility getting controlling resources and seizing private benefits of control (PBC).Regulatory measures and legal system are not yet perfect. That our listed companies which are under lower levels of governance have higher PBC is an indisputable fact. Although the large shareholder can effectively improve the level of supervision on the managers and avoid disperse shareholders'free-rider behavior. But large shareholders have their own interest, so they pursue PBC by making use of the controlling right. Then this will lead to the goal of maximizing the value of listed companies change. The business decisions do not maximize company value, but maximize the large shareholder their own interests.On one hand, the large shareholders get a lot of controlling resources, capitals and equities from investors, driven by PBC through pyramid way. On the other hand, within a given firm size and controlling resources, they possess the benefits of small investors through transfer pricing, related-party transactions. Thus, controlling resources, owned by large shareholders through capital investment, is not only resources of PBC, but also basis of internal transfer of resources and transfer of benefits.On the basis of analysis of investment decision-making and PBC, this paper focus on that analysis of the governance mode with large shareholder and the larger shareholder how to get controlling resources by fixed assets , long-term equity investment and other capital investment decision-making driven by PBC. Based on data of listed companies, this paper proves the relations between PBC and the scale, directions of capital investment. In this paper, the direction of capital investment means different kinds of investment, including fixed assets, long-term equity investments and intangible assets.This results show that:(1)PBC is the factor which drives the capital investment behavior under the governance of larger shareholder, and investment scale has strong relationship with PBC in different investment direction. (2)In terms of fixed assets, long-term equity investments and intangible assets three kind directions of investment, the cost of possessing PBC is low by equity investment, but the large shareholder also possess the lower PBC.(3)When the PBC level is higher, the companies will invest more capital investment to possess the equal PBC.(4)The capital investments in different directions don't improve the company value. So objectively speaking, investment decision-making under the control of large shareholders is self-interested behavior.Finally, from a practical view, this paper put forward countermeasures and suggestions, such as to optimize the ownership structure, improve the legal environment and improve bank supervisions.