Papers Category:Economics Papers
- New Economic Papers
Post Time:2013-7-3 1:30:00
Abstract: collusion companies and large shareholders and managers is mainly affected by the degree of internal corporate governance structure and corporate governance environment both external factors. Internal governance structure is adapted to an endogenous external governance arrangements, external governance environment are major shareholders and managers conspire Degree.
Keywords: major shareholders - managers; conspiracy; influencing factors; internal governance structure; external governance environment
In recent years, major shareholders and minority shareholders controlling agency problems between corporate governance became the focus of research. Shleifer, Vishny, Johnson et al study were that the controlling shareholder encroach on the interests of minority shareholders is the core of the modern corporate agency problem, Johnson, etc. even with the 'tunneling' word to describe the image of the controlling shareholder's expropriation [ 1]. However, the latest research shows that controlling shareholder encroach on the interests of minority shareholders is the result of collusion with the company's management . Because of the large shareholders are not directly involved in the daily management of the company, with little direct say in the company's specific issues, specific operational procedures of the company is not very familiar with, in order to transfer interests of the company, only in alliance with managers to achieve. The Chinese market is an emerging and transitional market, due to the short development time, the relevant legal framework to protect investors and the judicial system is not perfect, but instead of administrative measures adopted by the Government of economic and legal means to run excessive intervention in the economy, resulting in shares of listed companies in China have 'dominance' of the deformity ownership structure of state-owned controlling shareholders use their absolute control of the position and interests of small shareholders managers conspired predatory behavior is very serious. Controlling shareholder and manager of collusive behavior not only damages the occupation of the interests of minority shareholders, but also disrupt the social and economic order, the lower the social welfare papers download.
First, the concept of conspiracy Stanley Baiman, John.
H. Evans et al believe that collusion is a private, extrajudicial arrangement, in which agents do not agree with actions in accordance with the will of the owner . Tirole think conspiracy is two or more economic entities starting from maximizing individual interests and collusion harm the interests of third parties of a non-proper behavior . Bente Villadsn, suggests that supervisors and agents agree to conspire means choose a different non-cooperative mechanism of action pursued by the principal set of cooperative actions or actions vector vector set or action, the purpose is to make the supervisors and agents to obtain high gains on expected utility .
We believe that the conspiracy is two or more economic agents have the advantage of information or collusion alliance at the expense of the interests of other economic agents maximize their own interests at the expense of access to rent-seeking behavior. And this paper is to analyze the collusion especially controlling shareholder of listed companies and managers use information dominance collusion through related party transactions, funds used, dividend distribution and other means, at the expense of the interests of minority shareholders to maximize their own interests at the expense of access behavior.
Second, the company's internal governance structure for large shareholders - managers of collusion
(A) the impact of ownership structure Shareholding structure refers to the company's total share capital, the different nature of the proportion of shares in their mutual relations.
Ownership structure is the basis for the internal governance structure, is one of the most important internal corporate governance mechanisms. Shareholding structure of the company's internal information asymmetry, major shareholders and managers to grasp control over will have a very significant impact, thus affecting the major shareholders and managers conspire against the interests of minority shareholders plunder degree. Specifically, the controlling shareholder's stake, non-controlling shareholder's stake, the controlling shareholder of the nature of property rights, the controlling shareholder of the control factors such as ownership structure be major shareholders and managers collusion impact.
1. The controlling shareholder's stake. About controlling shareholder's ownership percentage impact on the degree of collusion earlier seen Jensen & Meckling (1978) literature. Their study suggests that, when all shares held by the controlling shareholder, the controlling shareholder (and managers) of the 'tunneling' behavior led to the loss of value of the company fell all by themselves, 'hollowed out' will bring marginal revenue may be less than As the 'hollowing out' to bring the marginal losses, thus controlling shareholder has not Expropriation motives. With the decline in the proportion controlling shareholders, 'hollowed out' led by a decline in value of the company is less and less part of themselves, 'hollowed out' net income growing, 'hollowed out' will be more motivation to the stronger. Therefore, the controlling shareholder's ownership percentage is higher, controlling shareholders and managers collusion embezzlement will be less. Morck, Shleifer and Vishny that the controlling shareholder's stake in the lower range of defensive entrenchment effect (Entrenchment Effect) will dominate, while in the higher range of the shareholding interests of synergies (Alignment Effect) dominates They use segmented regression method confirms this conclusion . Zengquan Li, SUN Zheng and Wang Zhiwei learn Morck et al method, using the Chinese A-share listed companies in a sample of 2000-2003 reached the same conclusion: in the lower stake, the major shareholders of listed companies occupied with funds The first increase in the proportion of large shareholders increases, when the first major shareholding ratio reached 40% to 50%, the major shareholders of listed companies occupied capital reaches a maximum; once the largest shareholder's ownership percentage over 50 %, and its capital is basically occupied with a higher proportion of their holdings decreased . But Tang Qingquan, etc. (2005), Qiu Zongshun and Rao Jing (2007) The empirical studies have found that: no matter where a float range segment, the controlling shareholders of listed companies and the controlling shareholder's stake is significant amount of funds used positive correlation, ie, the controlling shareholder's ownership percentage is higher, controlling shareholders and managers embezzlement conspiracy more serious. This conclusion Jensen & Meckling (1978) et al conclusion is inconsistent.
Then the controlling shareholder's stake on the controlling shareholder and manager of conspiracy 'tunneling' behavior of the mechanism in the end what is it? Controlling shareholder stake embezzlement conspiracy exists on the double impact: on the one hand affect the major shareholder 'hollowed out' capability. With the increase in the proportion controlling shareholders, minority shareholders and their shareholding ratio between the disparity is growing, increasing the degree of information asymmetry, the controlling shareholder of the use of information superiority private gain capacity is growing. While controlling shareholder of the company and managers the ability to control more powerful, it also further enhance the transfer of the controlling shareholder and manager interests of the company's ability to conspire. Expropriation increased capacity will show as much interest as the occupation of the cost to be reduced. On the other hand affect the 'hollowing out' motives. Controlling shareholder equity ratio increased to make their goals and interests of the target company as a whole tends to be consistent, because the shareholding ratio increases, the transfer of the company's interests as much value of the company led to the loss of pay for their part will increase, ' hollowed out 'net income will decline. Interest objectives converge encroachment motivation will decrease the controlling shareholder. Combination of these two effects the result, when the controlling shareholder equity ratio increased when they conspired occupation interests of the company and managers change depending on the degree of capacity enhancement embezzlement and misappropriation motivation decline relative speed. We are able to La Porta et al (2002) proposed encroachment interests of the company's controlling shareholder based on a theoretical model to analyze this relationship. Assumed that the controlling shareholder holds shares of listed companies as a, and holding such shares are capable of controlling listed companies. Listed company generated a profit of R, the controlling shareholder in dividends from the company before the transfer of a certain percentage of profits for private gain. Controlling shareholders transfer profits to pay certain costs, such as to cover up the fact that the establishment of specialized companies operating in the middle of transaction costs, was discovered by the costs of legal sanctions (Burkart et al., 1998) and so on. The cost depends on the size C controlling shareholder's stake, the legal level of protection for investors and profit-shifting scale. We denote by a, k, s represents the controlling shareholder's stake, the legal level of protection for investors and profit-shifting scale, there are:
C = C (a, k, s) (1) a greater control of the controlling shareholder of the company, the stronger, and minority shareholders the degree of information asymmetry between the higher will be the ability to transfer profits stronger, and thus the cost of transferring the same profits lower, namely Ca <0 . k greater degree of legal protection of investors is higher, the behavior of the controlling shareholder, the easier transfer of profits to be found, was discovered by the degree of legal sanctions will be more severe, so the higher the cost of the transfer of profits, that Ck> 0. S larger scale transfer of profits, was found bound to be punished for the possibility of greater and greater size of the transfer, and then increase the difficulty of transferring the larger the scale, so Cs> 0, Css> 0. Cs> 0 means that the marginal cost of transfer of profits greater than 0, Css> 0 means that the marginal cost is increasing. When the controlling shareholder's ownership percentage increases, the marginal cost of profit-shifting is reduced, that is Csa> 0.
Controlling shareholders from the company's regular dividend income and appropriation of net income to net income of occupation costs:
U = a (1-s) R + sR-C (a, k, s) R (2)
Where, a (1-s) R is a controlling shareholder of the stake acquired in accordance with the normal dividend, sR is the transfer of profits and managers conspired to obtain encroachment income, C (a, k, s) R is a transfer of profits costs incurred. When the controlling shareholders transfer profits ratio s increases, occupation sR revenue will increase, but the normal dividend yield a (1-s) R will decline, occupation costs C (a, k, s) R will increase. s improved to a certain extent the controlling shareholder of total net revenues will reach the maximum, can be achieved by (2) and to make a type derivation derivative equal to zero, we get:
U's = [-a +1- Cs (a, k, s)] R = 0 (3)
Cs (a, k, s) = 1-a (4)
In summary, the shareholding ratio lower level, controlling shareholders and managers conspired to seize the benefits of the company's controlling shareholders with the extent of the increase in the proportion of more serious; at stake higher level, holding shareholders and managers conspired to seize the benefits of the company's controlling shareholder equity ratio with the extent of the increases. (2) the proportion of non-controlling large shareholders.
In the controlling shareholder and manager interests of the company conspired encroachment cases, the non-controlling interests of major shareholders will suffer. Then take the non-controlling shareholder 'vote with their feet' way to protect themselves cost is relatively high, because a lot of selling stocks will lead to substantial decline in stock prices. If you do not 'vote with their feet', non-controlling shareholder will be by strengthening the supervision of controlling shareholders and managers to protect their own interests. Non-controlling shareholder is also a higher proportion of shares held by the company, with a certain company's ability to obtain information, and controlling the behavior of major shareholders and managers to monitor, supervise while the benefits are more able to withstand more monitoring costs, and thus the greater oversight power. Non-controlling shareholder's ownership percentage is higher, oversight capabilities and motivation, the stronger the effect will be better supervision, the controlling shareholder of embezzlement will be weakened.
3. The controlling shareholder equity in nature. Controlling shareholders can be divided according to the different nature of property rights of state-owned shareholders and non-state shareholders. State-owned shareholder is the government departments, state-authorized investment institutions and state-owned enterprises and other shareholders, in addition to private enterprises, foreign-funded enterprises, collective enterprises and social organizations and the ESOP Association and other shareholders are non-state shareholders. State shareholders represents the will of the government, and the government is not only the pursuit of economic objectives, as well as multiple social public management goals, such as improving social employment, maintaining social stability, and provide products and services, the rapid accumulation of capital from the stock market to obtain resources to develop local economy. In this case, the controlling shareholder is often the target for a number of social and public administration transferred profits of listed companies. For example, when the local government revenue shortage occurs, needs funds to stimulate economic development, increasing employment, it may drive the controlling shareholder through the 'hollowing out' of listed companies to obtain funds to solve these problems . In contrast, the non-state shareholders do not have to bear these social responsibilities. Therefore, when the controlling shareholder of listed companies are state-owned properties, the transfer of listed companies profit motive is more intense, the degree of occupation may be more serious. 4 Controlling Shareholder form of organization.
We will form the controlling shareholder of the organization is divided into two kinds, one is operating enterprise group, another non-enterprise groups. The so-called business enterprises group company refers to the capital as the main link of the parent company as the main link to our constitutional norms of behavior for the common parent company, subsidiaries, joint stock companies and other members of the enterprise or institution composed of a certain scale enterprises corporation of the Commonwealth. In addition to the organizational form are called non-enterprise groups. Wolfenzon (1999) studies suggest that, relative to the non-controlling shareholders, business groups, business groups organized in the form of cross-shareholdings by the controlling shareholder, the pyramid structure, etc. in order to obtain a lower stake control of listed companies, which can reduce their collusive behavior on their own occupation offset by equity income, net of collusion higher. Khanna (2000) study is that companies within the Group member companies formed between the capital markets and factor markets as controlling shareholder through related party transactions of this most subtle way 'tunneling' of listed companies may be provided. Thus Group's controlling shareholder group than the non-controlling shareholders have more power and abilities and managers conspired against encroachment interests of minority shareholders, which would be more serious degree of encroachment. In fact, Li Zengquan, etc. (2004) and Zhou Zhongsheng (2007) in a sample of listed companies in China are empirical findings support this conclusion.
(Two) the impact of board composition Large number of theoretical and empirical results indicate that board composition and company performance there is a significant correlation.
Different countries, members of the board of directors of listed companies constitutes although somewhat different, but similar, generally consists of three parts: one part comes from within the company as president, vice president, chief financial officer and other senior management positions (managers directors); another part from the company's individual shareholders (shareholder directors); remainder comes from the relationship with the company is not associated with other social organizations or institutions, experts and scholars (independent director). Among them, the manager director of the company's managers themselves, monitor themselves will naturally decrease the efficiency. From the controlling shareholder of the shareholder directors represent the interests of the controlling shareholder, the controlling shareholder and minority shareholder conflict of interests, in particular controlling shareholders and managers conspired occupation interests of minority shareholders, they not only do not prevent, but also to provide help and Support. Interests of minority shareholders and the company's interests are the same, so they sent directors are able to maximize the value of the company as a starting point of the exercise of decision-making and supervision. Independent directors are also independent of the individual shareholders and managers is more objective and fair exercise of their powers. Managers from within the company directors and controlling shareholders use their control over access to information about the Company's operations adequate information, in essence, is the company's 'internal', so we can managers from the controlling shareholder of directors and directors collectively of inside directors. Accordingly, from the minority shareholders and independent directors called outside directors. Controlling shareholders is through the help and support of inside directors and managers collusion strengthen control of the company, expanding the company's degree of information asymmetry, thereby enabling minority shareholders interests against encroachment motives into reality. Board of directors within the higher the proportion of the company's controlling shareholders and managers greater ability to control, conspiracy occupation interests of minority shareholders will be higher degree.
Third, the external governance environment on major shareholders - managers of collusion
Since the late 1990s, La Porta, represented by a group of scholars will study the perspective to expand outside the company's legal system and other environmental factors, opening up a new field of corporate governance research. Corporate governance in the external environment, including a country or region's legal system, government intervention, market competition, religious culture, and many other aspects of the credit system, in which the legal system and government intervention is the most critical factor.
(A) the impact of the legal system Legal system's role in corporate governance is to improve the legal system can guarantee the rights of outside investors to be implemented. Both Jensen and Meckling, or Hart have pointed out that the implementation of the rights of investors depends on the degree of perfection of the legal system  . Legal regime for the protection of investors, primarily by affecting the company's equity concentration and composition of the Board and other internal governance mechanisms and controlling shareholder of the cost of transferring profits while controlling shareholders and managers affect the degree of collusion occupation.
1. The legal system and ownership concentration. Legal system and ownership structure as two different governance mechanisms, common in corporate governance effect of being able to strengthen supervision and restraint of the company managers, thereby reducing agency costs of managers. Shareholders do not participate in the daily management of the company's situation, the company managers to grasp the company's residual rights of control, they can use the residual rights of control at the expense of the interests of shareholders at the expense of seeking personal benefit. If the legal system is a strong degree of investor protection, information disclosure requirements would be higher, minority shareholders will be able to more easily obtain information about the company, the interests of managers embezzlement more easily be found, and will be subject to legal punish, the shareholders can not put too much effort for managers to supervise. In order to reduce the investment risk, the shareholders of the company will reduce its stake. But the poor level of investor protection in the case of embezzlement managers are not easy to find, large shareholders in order to strengthen the supervision of the manager, only raise its stake in the company. Stake increase, on the one hand enable the shareholders in the company have more say in decision-making, and can be deployed to the company directors and other information obtained by the Company's operations, reducing the information asymmetry and managers to improve on the management of who conducted oversight. The other hand the shareholder oversight managers income sufficient to cover the cost of supervision, improve the supervision of power. When the concentration of ownership to a certain extent, mastered the control of the company's largest shareholder find them with the information asymmetry between minority shareholders can make their own corporate interests and managers conspired occupation, and the higher the stake, the more likely embezzlement implementation, which will further promote the company's equity focus. Therefore, concentration of ownership and legal protection for investors with alternative governance mechanisms. LLSV (1999) is the first empirical study of this issue of the scholars, who by examining the 27 largest companies in rich countries economic control of the concentration found weaker investor protection law countries, the more centralized control of the company. Himmelberg, etc. (2002) empirical analysis of the 38 countries in the sample data, results showed that: the proportion of insider ownership and the level of legal protection of investors and the efficiency of the judicial system, a significant negative correlation. Boubakri etc. (2005) in the control of the company and country factors also found that ownership concentration and legal investor protection significantly negatively correlated, ownership concentration in civil law countries are more concentrated. Therefore, they believe that the emerging developing countries, concentrated ownership structure can be used instead to provide legal protection for investors the role of corporate governance, concentrated ownership is an important corporate governance mechanism.
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(2) legal system and composition of the Board.
Board composition reflects the status of an important indicator is the independence of the board. Board Independence refers to the Board as an independent actors in the decision-making process reflects the fair, not biased in the interests of any party values, both individual and independent shareholders' independent managers, aimed at achieving value for all shareholders value and protect the interests of all shareholders. Agency theory suggests that inside directors or major shareholders and company managers or personnel working-level contacts exist, is difficult to expect inside directors constraint for managers play a supervisory role. The outside directors are more objectively represent the interests of all shareholders to managers for effective supervision. The Board therefore the higher the proportion of outside directors, board independence is stronger, and thus the higher the efficiency of governance.
As director of outside directors with respect to the internal managers can more effectively monitor, small shareholders want to have more outside directors to the Board. But company managers do not welcome outside directors, major shareholders do not welcome outside directors, because they may use their control over the plunder and managers conspired interests of small shareholders, to increase the proportion of outside directors will make their predatory behavior is difficult to achieve . Therefore, unless the law be able to provide protection for the rights of minority shareholders, minority shareholders with voting rights is difficult to influence the composition of the Board. For example, the minority shareholders would follow through general elections in motion and procedures to the Board the appointment of outside directors, there must be formal legal procedure for this process to provide oversight and protection. Seen in this light, the law on the protection of minority shareholders' rights and a strong board independence is complementary rather than alternative governance mechanisms of governance mechanisms. Countries with better protection of shareholder rights, minority shareholders can influence the composition of the Board, they will choose more outside directors to the board of directors, board independence and thus stronger. Kenneth A 14 European countries, such as the use of a large sample of companies on this issue an empirical study conclusion is confirmed by the strong legal protection of shareholders' equity will indeed improve the company board independence . Doidge, etc. (2007) in empirical research has made the same legal level of protection for investors positively correlated with board independence assumptions, the empirical results support this hypothesis. And they also found that a company's governance scores and La Porta, Lopez-de-silanes, Shleifer and Vishny (1998) designed equity index positively correlated, suggesting that the legal system can be improved by increasing the independence of the board to improve corporate governance efficiency. Klapper and Love (2004), Krishnamurti, etc. (2006) empirical results support our conclusions.
3. The legal system and collusion costs. Controlling shareholders and managers conspire transfer of profits is the interests of minority shareholders, occupation, must have been the opposition of minority shareholders, so often taken covert manner. Weak investor protection in the legal case, the company will increase ownership concentration, corporate boards of directors and managers on behalf of the interests of the controlling shareholder will also increase the proportion of directors, which caused managers and controlling shareholders and minority shareholders serious information asymmetry between. Meanwhile, the legal requirements for disclosure of information on the company will be reduced, making the minority shareholders through the company's initiative to reduce the amount of information disclosed to obtain, further exacerbating the degree of information asymmetry. Improvement in the level of information asymmetry makes it easier to conceal the controlling shareholder's shift our attention to minority shareholders of profits, thereby reducing the transaction costs of collusion. Strong investor protection in the legal case, the decline in company ownership concentration, the board increase in the proportion of outside directors and disclosure requirements increase will reduce the controlling shareholders and minority shareholders, managers and information asymmetry between the degree increase the transaction costs of collusion. Degree of legal protection of investors and managers will also affect the controlling shareholder of the cost of legal penalties collusion.
Expropriation same behavior, weak investor protection law cases may be lawful, but in the case of strong investor protection may be an offense to be punished by law. Even though in both cases belong to the interests of illegal encroachment behavior, the higher the degree of investor protection law in the case, was found and punished probability higher, and punishment will be more severe. Therefore, the higher the degree of legal protection for investors, controlling shareholders and managers conspired higher the cost punishable by law. Collusion costs directly affect net income conspiracy, conspiracy costs, net income will drop conspiracy.
Net income decreased conspiracy, conspiracy motivation will drop, leading to a decline in collusion. We can continue to use the previous analysis controlling shareholder equity ratio affect the degree of collusion model to demonstrate this relationship. According to formula (4) for k derivative, we get: As already proved Css> 0.
With the law on a higher level of investor protection, the marginal cost of transfer of profits will certainly increase, which indicates the degree of investor protection as the legal right to improve, increase the cost of collusion will lead to controlling shareholders and managers minimize collusion.
(Two) the impact of government intervention
Government intervention in the economy to achieve its aim of economic development, the accumulation of capital, increase employment, maintaining social stability, such as multiple targets. Governments often by strengthening the control of the business to achieve the intervention in the economy, and to strengthen the control of the enterprise mainly taken two approaches. The first is through the means of a higher proportion of equity held by companies to gain control over the position. This will lead to business ownership concentration improved, and the government became the controlling shareholder. Bortolotti and Faccio OECD countries since 1996 through the privatization of 141 companies control over the evolution of the structure were investigated found that after the privatization of government enterprises has not really relinquishes control of such privatization was dubbed the 'reluctant privatization. ' In 2000, the authors found that, in the so-called privatization of companies, 62.4% of the companies are either Government is still the largest shareholder, either through a variety of ways the government is still exercising special rights of control. Government to strengthen the second means for corporate control is to control the company's human resources market. On behalf of the government by the government or state-owned major shareholder interests directly appointed executives of listed companies and even most members of the Board of Directors, these executives, directors (excluding independent directors) is often derived from internal or controlling shareholders of the listed company units. They represent the will of the government, rather than the will of the shareholders, which seriously weakened the independence of the Board. Government-controlled enterprises, it will be passed on to their control social burden of enterprises. For example, when the government budget deficit occurs, it will drive through the controlling shareholder funds of the Company to assist the government to solve social problems related; when the government-owned holding company in financial crisis, the government will support them, 'emptied' of listed companies to obtain funds to survive. And the Government to strengthen the control of the business, its behavior is often above the law, weakened the legal protection of investors' interests functionality, reducing the level of legal protection of investors. La Porta et al (2000) study suggests that, in civil law countries, the government is likely to be economic decision not to grant the court, but to use government power to direct intervention in the economy.
In summary, the government intervention in the economy will increase the ownership concentration of listed companies, reduce board independence, reduce the degree of legal protection for investors, thus exacerbating the controlling shareholder of listed companies and managers degree conspiracy transfer the company's profits.
Fourth, the study concluded This paper analyzes the company's major shareholders and managers interests of the company conspired occupation factors.
Our analyzes suggest that the degree conspiracy mainly by the following two factors: the first is the company's internal governance structure. The company's ownership structure (including the controlling shareholder's stake, the nature and form of organization of property rights as well as non-controlling largest shareholding ratio) and composition of the Board and other internal governance structure differences that affect large shareholders and managers conspired degree predatory interests of minority shareholders The most direct factor. The second is the company's external governance environment. Company law area level of protection for investors, government intervention in the economy and other external governance level environmental factors affect the company's equity through the concentration and composition of the Board and other internal governance structure and collusion costs thereby affecting the large shareholders and managers embezzlement conspiracy . Thus, the company's internal governance structure is to adapt to the external environment of an endogenous governance arrangements, external governance environment are major shareholders and managers degree of collusion most fundamental factor.
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