Large Shareholder's Counterbalance, Board Characteristics And Lager Shareholders Tunneling

Traditional agency theory is mainly based on the view of a high degree of separation between the ownership and control right in modern enterprise, so the early research of corporate governance was mainly focused on the principal-agent problem between the shareholders and managers. However, in recent years many scholars have found that most of the country's corporate ownership structure is not dispersed, but concentrated, so they focused more on the interest conflict between the large shareholders and small shareholders. In our country the Big Stock phenomenon is very common in despite of the implementation of equity division reform. Based on previous studies, this paper was empirical studied the relationship between corporate governance characteristics and tunneling of lager shareholders.Firstly, this paper made a review of corporate governance and lager shareholders tunneling, and then we proposed our research method. Secondly, we discuss the characters of in the listing companies in our country, and then analyzed how corporate governance affected on lager shareholders tunneling after the implementation of equity division reform. Subsequently, we selected the 2006-2008 financial data of listed companies in China and empirical analyzed other large shareholder's counterbalance and board characteristics effect on lager shareholders tunneling. At last some policy-type suggestions were given to improve corporate governance so as to contain lager shareholders tunneling.We conclude the results of the empirical study as follows:①Lager shareholders'tunneling has a U shape relationship with other large shareholder's counterbalance. Major shareholders have mutual limit and balance, and they may also collude and hollow the public firms.②Corporate performance whose resources are diverted has reversed U shape relationship with other large shareholder's counterbalance. The more resources lager shareholders tunnel, the worse the company's performance would be.③The relatively larger size of board of directors can restrict lager shareholders tunneling.④The rate of shareholding directors and the rate of share held by board of directors have inverse relationship with lager shareholders tunneling.⑤Independent directors only have limited restriction on lager shareholders tunneling in public firms, which is statistically insignificant.⑥The establishment of auditing committee can limit lager shareholders tunneling to some degree.⑦The board of supervisors does not have monitor effect as expected on lager shareholders tunneling. In our country, lack of independence, pertinence and expertise has large limitation on the function of board of supervisors.