The Research On Managers’ Expropriation And Its Regulation Under Circuitous Management Buy-Outs’ Environment

Ever since reform and opening up, people have been seeking a way of reform for the massive state-owned assets’ management, in order to enhance its efficiency and appreciate its value. In the late90s, under the institutional environment of state-owned companies’ transformation, the "state ebb and private flow" strategy and the creation of incentives for the administrators etc, MBO is introduced from the western countries as a way of transforming asset operation, enhancing administrative efficiency and solving the "lack of owners" puzzle. However, up till2002, it has gradually revealed some problems concerning MBO in our country, such as lack of transparency, stated-owned assets’ loss and wealth transfer. So severe is these problems that in2005, the authorities carried on policies that officially terminate MBO. In spite of this, such policies failed to actually curb MBO, merely letting MBO occur in more indirect, hidden ways due to the circumvent of governmental regulations.In this process, the problems concerning insider control, which takes forms of occupation of other investors’interest e.g., abnormally high dividends, unjustified affiliate transaction, trading stocks for unfairly low price etc, is extremely serious.Compared to the existing research which mainly focus on the years prior to2005, this dissertation, with its theoretical basis of principal-agent and through its comparative study of foreign and domestic MBO, is targeted to analyze the post2005MBO cases of Shuang Hui Fa Zhan and Dong Bei B. The paper studies the operation of indirect MBO after the year2005and its consequent interest occupations and tries to find the solution to such occupations under indirect MBO after2005.The research reveals the typical indirect path of MBO, namely the managers firstly establish a platform of buy-out,then upon platform they can acquire stocks from parent company, finally these managers realize an indirect control over state-owned listed companies. On this path, former existed interest occupation has become more covert as well as severe. Based upon this analyze, indirect MBO and interest occupation root from weak corporate governance, lack of incentives for managers and absence of restrictions of managers. Therefore, in order to solve the problems of lack of incentives and absence of restrictions on a managerial level, the construction of better established incentive system, the more strict inspection on revealing accounting information and the establishment of a investors’ protection system are essential.This paper consists of5chapters:Chapter1gives a brief introduction of the updated situations facing MBO currently in our country as well as the background, significance, structure, methodology and creative points of this paper.Chapter2gives a definition of indirect MBO and reflects on the research from both home and abroad currently.Chapter3explores the shortcomings of our MBO system through comparative analysis of the development of MBO system between China and developed countries where the system is more well-established. These shortcoming are the reasons why those methods which work effectively to solve the principal-agent problem and enhance corporate performance fail to function in China.Chapter4is a MBO case study of Shuanghuifazhan and Dongbei B, analyzing the characteristics of implementing indirect MBO under restricting policies and its corresponding interest occupation.Chapter5puts forward suggestions on policies concerning reducing interest occupation in the discovered indirect MBO from both managerial motivation’s and regulation’s point of view.