Private Benefits Of Control Affects Firm Performance Theory And Empirical Tests

The behavior of the major shareholder's private benefits of control is a globally recognized corporate governance problem as well as the current focus of the corporate governance practice.Under special governance environment of China's transitional economy,the major shareholder in the state-owned holding company and family holding company have control over Shareholders' Meeting,the board of directors,managers and even related companies.So they might have against the minority shareholders and the public interest in the pursuit of private benefits of control,thus destroying corporate governance environment.From the major shareholder's tunneling overall analysis paradigm of"Motivation-Behavior-Performance",the paper analyzes the dynamic process and subject behavior of the formation of the major shareholder's private benefits of control,and then establishes a linkage relational model between the major shareholder and corporate performance.Furthermore the paper conducts an empirical analysis,coming to a conclusion of behavior pattern of the major shareholder's private benefits of control.Noting its behavior is actually the process of adaptation system situational factors and the main influencing factors,which has ethical decision-making characteristics.Through cross-cases analyzing the paper summarizes three basic behavior patterns of large shareholders' private benefits of control including breaking a red light mode which is illegal,edge ball model which is legal but may be unreasonable and nibble mode which is in line with the legal norms and corporate governance procedures but may be contrary to social ethics.In order to promote the governance of the large shareholder's private benefits of control behavior,strengthen the rigid constraints of corporate governance regulations,and severely punish all kinds of illegal behavior.Meanwhile,we should standardize the boundary of the relevant acts to improve the moral strength of the large shareholder's ethical decision-making,so as to squeeze the opportunistic choice of space.What's more,improve the legal system of the company;respect the legitimate rights and interests of the stakeholders,and incentive compatible and sharing among the large shareholder's private benefits of control and corporate performance.This study aims at dynamically identifying and analyzing the behavior pattern of the major shareholder's private benefits of control from two-dimensional perspective of institutional and ethical,which will provide theoretical support and policy recommendations on designing effective governance strategies,optimizing the Board of Directors,improve internal control systems and market regulatory system.Through the empirical research on the institutional level,theoretical analysis and multi-case analysis of ethical perspective,we draw the main conclusions as follows:First,under the institutional perspective,through the dynamic process of analyzing the formation of private benefits of control,the paper constructs an infiltration conduction model among rigid income,flexible income of the major shareholder and corporate performance border.And through the subject behavior analysis,the paper draws the impaction of the major shareholder ownership structure,corporate governance on private benefits of control.Finally,based on the influence of private benefits of control on corporate performance,the paper proposes the accession to the major shareholder's private benefits of control is the result of the major shareholder constantly pressuring control over revenue sharing,expansion of private benefits of control,that is exiting a rigid boundary and elastic boundary,then concludes the four relations between private benefits of control and corporate performance.Second,based on the empirical research,the paper concludes the non-linear inverted U-shaped relationship between the largest shareholder's stake and private benefits of control,and positively U-shaped relationship between private benefits of control and corporate performance,indicating there both exiting entrenchment effect and incentive effect in the listed companies.As empirical results and mechanism analysis contrary,we make a further analysis of company development lifecycle and conclude that the relationship between largest shareholding ratio and private benefits of control should be positive U-shaped and inverted U-shaped combination of S-shaped curve.Accordingly,the relationship between private benefits of control and corporate performance should be inverted U-shaped and U-shaped combination of inverted S-shaped curve.Third,embedding ethical decision-making factors,the paper summarizes three basic behavior patterns of large shareholders' private benefits of control including breaking a red light mode which is illegal,edge ball model which is legal but may be unreasonable and nibble mode which is in line with the legal norms and corporate governance procedures but may be contrary to social ethics.