Corporate Governance in China: Research and Evaluation

CHAPTER 3

Research on Evaluation and Index of the Controlling Shareholders' Behavior

The controlling shareholders, the specific resource investors of the corporation, will face the firm's special risks—the costs minority shareholders need not pay—as they invest more resources in the corporation and their properties connect with the corporation's future more closely. But the complexity of the transition period in China decided the complexity of the behaviors of listed companies' controlling shareholders. Their target is not based on the comparison of the income and the cost, but the considering of the overall rights of the whole group. Thus, the analysis of the behavior of Chinese listed companies' controlling shareholders should extend the scope of controlling rights from the subsidiary companies of listed companies to the controlling shareholders and the whole group of other related companies for the sake of reflecting the controlling shareholders' domination of the resources of the whole group. The control benefit not only appears as cash flow rights, but also appears as a way of tunnelling further. The claims of “control right—cash flow right” paves the way for our analyzing factors affecting the behavior of the controlling shareholders of Chinese listed companies.

Reviews on the evaluation of controlling shareholders' behavior

The risk of specific resource has not become the barrier to the property concentration that Demsetz and Lehn (1985) found if the firm's certain risk ...