China
Government Enterprises
Corporate Governance
Concentrated Owner
Expropriation
State Owned enterprises
G32 - Financing Policy; Capital and Ownership Structure
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
K22 - Corporation and Securities Law
O31 - Innovation and Invention: Processes and Incentives
P34 - Financial Economics
P31 - Socialist Enterprises and Their Transitions

First published in Feb-2010, revised in Jun-2010.
Literature on agency problems arising between controlling and minority owners claim that separation of cash flow and control rights allows controllers to expropriate listed firms, and further that separation emerges when dual class shares or pyramiding corporate structures exist. Dual class share and pyramiding coexisted in listed companies of China until discriminated share reform was implemented in 2005. This paper presents a model of controller to expropriate behavior as well as empirical tests of expropriation via particular accounting items and pyramiding generated expropriation. Results show that expropriation is apparent for state controlled listed companies. While reforms have weakened the power to expropriate, separation remains and still generates expropriation. Size of expropriation is estimated to be 7 to 8 per cent of total asset at mean. If the "one share, one vote" principle were to be realized, asset inflation could be reduced by 13 percent.

Institute of Developing Economies, JETRO
日本貿易振興機構アジア経済研究所

Technical Report

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IDE Discussion Paper. No. 224. 2010. 06
IDE Discussion Paper
224

publisher

335.7