Chapter 8 Chapter VI Minority Shareholders, Major Shareholders and Creditors

In addition to the aforementioned fiduciary responsibilities and government interference, the system of incentive contracts should be the most talked about in the academic circles.I've personally done a lot of research in this area as well.In order to ensure that managers can act according to the wishes of small shareholders, the best way is for managers to sign a "Complete Contract" (Complete Contract) with small shareholders in advance.This perfect contract can clearly tell the manager when to do what.This is the origin of modern contract theory [see Coase's (1937) theory].However, due to the occurrence of too many unpredictable events, such as the Middle East war and the "9.11" incident, it is impossible to sign the so-called "perfect contract" in advance.The only option is to sign the so-called "Contingency Contract".The significance of this contract is to return the ultimate control of the company to the hands of small shareholders.Therefore, small shareholders can make the final decision when unexpected events occur.In order to solve the problem of how the ultimate control should be distributed among shareholders and managers, a set of equity theory was formed [Grossman, Hart (1986)].

But this kind of emergency contract can't solve the problem, because the minority shareholders hold too few shares, and no one is interested in spending time and trouble to supervise managers or make decisions when emergencies occur.Every shareholder hopes that other shareholders can manage the manager well, and it is best for him to "free ride" (Free Rider Problem).In the end, no one cares about the ownership of the ultimate control right, so the manager still has the ultimate control right [Grossman & Hart (1982)].And this kind of control is quite valuable. For example, in Israel, stocks with special voting rights (that is, more than one share) have a premium of 45.5% compared with ordinary stocks [Levy (1982)]. The premium on voting shares is 6.5 percent in Sweden [Rydqvist (1987)], 20 percent in Switzerland [Horner (1988)], and 82 percent in Italy [Zingales (1994)], but very low in the United States [Lease, McConnell , Mikkelson (1984)].

When managers get the ultimate control, they can openly exploit the tricks of shareholders.But the problem is that if stockholders know that you will exploit them, it is impossible for them to enter the stock market so stupidly, give money to managers, and let them exploit themselves.If managers can't do some work to improve the confidence of shareholders, the stock market will be like the Chinese stock market in 2002, because small shareholders are no longer willing to put money into the stock market.Therefore, many literatures on corporate governance in the world are discussing how managers can do their work in advance to ensure that small shareholders will not exploit them.For example, you can contribute a little share capital in advance, or make a certain degree of guarantee in advance.

Because managers have to spend more energy to prove to the small shareholders in advance that they are not bad, it often limits their ability to play.Such a company may not perform as well as a company in which the manager holds 100% control.This is a question of cost [see Jensen and Meckling (1976)]. If the managers successfully get the money, is it possible for them to choose a relatively poor project to invest in after the fact, for example, a project with an income of only 3,000 US dollars?The manager may reap $1,000 in benefits from this program.In fact, small investors can pay $1,100 to bribe managers not to invest in the project.There are so-called "golden parachutes" in the United States, that is, shareholders pay managers to ask them not to oppose other people's acquisition of the company.When the company is successfully acquired, the manager can get a lot of money and walk away [see Lambert and Larcker (1985)].

The problems mentioned above clearly pointed out that small shareholders cannot protect their own interests through perfect contracts and emergency contracts, so the so-called "Incentive Contract" (Incentive Contract) was gradually formed, through which the managers Linked with the interests of small shareholders.At present, "incentive contracts" still occupy a dominant position in Britain and the United States.Whether this kind of contract can achieve the desired effect depends entirely on whether we can find some objective indicators related to the manager's decision-making level to judge the manager's decision-making level [Jensen, Meckling (1976), Fama (1980)].For example, the incentive options launched by China Mobile and China Unicom are one type of incentive contract.Moreover, if the company does not manage well and the stock price falls, it will be hostilely acquired, which is also part of the incentive contract.Any corporate policy that compels managers to operate well for shareholders is an incentive contract.But can incentive contracts solve the problem?It's not easy for me.For example, Yermack (1997) found that incentive options are usually subscribed before the company's good news is announced, or postponed until after bad news is released.This seems to show that the manager's selfishness is still very heavy.

We can also find quite a few cases to illustrate that managers do not plan for the interests of small shareholders, but only care about their own self-interest.For example, Jensen (1986) proposed why managers would invest in the aforementioned projects that benefited $3,000?His reason is simple, because the managers do not have good projects, but they have too much cash in their hands, and they don't want to pay dividends back to investors, so they invest in bad projects.Two of my papers test Jensen's claims.In Lang, Litzenberger (1989), I showed that if firms do not invest in bad projects and instead issue dividends, stock prices will rise.And in Lang, Stulz, Walking (1989) I demonstrated that continuing to invest or acquire in the absence of good projects will lead to a decline in stock prices.

Managers investing for their own benefit rather than the benefit of investors have brought stock prices down in East Asia.Papers such as Roll (1986), Jensen, and Ruback (1983) provide evidence that when firms announce acquisitions of other firms, their own stock prices fall. The paper of Lewellen, Loderer, Rosenfeld (1985) pointed out that this phenomenon is caused by the fact that the managers themselves hold too few shares. Morck, Shleifer, and Vishny (1990) pointed out that when a company acquires a high-growth company or conducts diversified investment, the company's stock price is more likely to fall.In addition, the papers of Lang and Stulz (1994) and the papers of Comment and Jarrell (1995) all pointed out that the company's diversification will lead to the decline of stock prices.

We also find considerable evidence that corporate managers defend their own interests against merger proposals that favor small shareholders.See DeAngelo, Rice (1983), Jarrell, Pouls-en (1988a,b), Melatesa, Walkling (1989).In addition, Johnson, Magee, Negarajan, and Newm-an (1985) found that if a manager in a large company who only cares about expansion and does not return cash to small shareholders dies suddenly, the stock price will rise immediately. People have a mentality of hatred. According to the previous analysis, we found that small shareholders basically cannot effectively control managers through incentive contracts.Even in the United States, incentive contracts are often invalidated.Basically, managers are mainly pursuing their own interests, rather than the interests of small shareholders.Regardless of whether the incentive contract can be very effective in protecting small and medium shareholders, it currently exists almost only in the United States and the United Kingdom.Incentive contracts still do not play a significant role in continental Europe and Asia.

Under such circumstances, why are small shareholders still willing to put money in the hands of managers?Can it be attributed to the inexplicable and reckless optimism of small shareholders?This argument is not without reason, such as the Nasdaq Internet boom is a prime example.In the railroad boom in the United States in the 19th century, stockholders invested a large amount of money in the stock market without any protection [Galbraith (1995)].In addition, Ritter (1991), Loughran, Ritter, Rydqvist (1994), Teoh, Welch, Wong (1995) all pointed out that when new listings and new shares are issued, stock prices will be overvalued.In the 1980s when junk bonds were used to buy companies, Kaplan and Stein (1993) also proved that junk bonds were overvalued at that time.These evidences show that small investors may have an optimistic and reckless ignorant mentality.But it is really hard for me to believe that small shareholders are so ignorant.

Our previous discussion almost focused on small shareholders, but it goes without saying that, except for the United States, listed companies in many countries have large shareholders. Therefore, the role of large shareholders in corporate governance is also discussed in academic circles focus. In the 1990s, the academic circles did in-depth research on the behavior of major shareholders in Eurasia. Frank and Mayer (1994), the Organization for Economic Cooperation (OECD, 1995) pointed out that the German Commerzbank controls about 1/4 of the large listed companies through stocks, and plays the dual roles of creditors and shareholders at the same time.They also pointed out that German small and medium-sized companies are mainly controlled by families, and they have a pyramid-style holding structure, that is, A controls B, B controls C, and C controls D... Barca (1995) pointed out that this pyramid-style holding structure is the most effective It is beneficial for shareholders to control a series of companies with small stakes. Gorton and Schmid (2000) estimate that the major non-bank shareholders in Germany also control 1/4 of the company's equity. Prowse (1990), Berglof, Perotti (1994), OECD (1995) pointed out that there is a large number of cross-shareholdings in Japan, and bank holdings are also the norm. OECD (1995) pointed out that most countries in the world, including Asia, Latin America, Africa, and continental Europe, are almost all in the form of concentrated equity holdings.

As for the research on the ability of major shareholders to strengthen corporate governance, the research gradually took shape in the mid-1990s. Frank and Mayer (1994) pointed out that companies controlled by major shareholders have a higher turnover rate of directors. The research of Gorton and Schmid (2000) shows that the existence of major shareholders of German banks and other major shareholders can significantly improve the company's operating performance. Kaplan, Minton (1994), Kang, Shivdasani (1995) proposed that Japanese major shareholders can replace managers more effectively than companies without major shareholders when encountering performance decline.Moreover, Japan's major shareholder holding companies will reduce expenditures such as advertising, research and development, and entertainment [Yafeh and Yosha (1996)]. Research by Shleifer, Vishny (1986), and Shivdasani (1993) showed that the presence of external major shareholders (non-managers) in the United States increased the chances of a company being acquired, and research by Denis and Serrano (1996) also showed that even if merger attempts failed , firms with external large shareholders are also more likely to change managers. The thorough research on major shareholders in the world began in the late 1990s. La Porta et al. (1999) studied companies in 27 countries around the world.They pick out the 25 largest companies and 10 mid-sized companies in each country, and then find the shareholder or holding company, and then continue to search based on the holding company until they find the ultimate shareholder.Moreover, the article also proposes that the ultimate shareholder separates ownership and control by means of pyramidal holding structure, cross-shareholding, multiple holdings, double voting rights, and family members acting as managers, and then uses less equity to strengthen its control. The control ability of listed companies. We use the following simple example and Figure 2 to illustrate: Among them, family control ABCD is the so-called pyramid holding structure. And the family uses a pyramidal holding structure to separate ownership and control.For example, the family controls 51% of company A, company A controls 51% of company B, company B controls 51% of company C, and company C controls 50% of company D.Under the control of the pyramidal holding structure, the family's ownership of Company D is about 7% (51%X51%X51%X50%), while the control right is 50%.The pyramidal holding structure creates a separation of ownership and control, as ownership is 7% and controlling interest is 50%.That is to say, the East Asian family has controlled quite a few companies with less equity, and the separation of ownership and control has also given the family the opportunity to exploit small and medium shareholders.And the family controls D through another company F, which is the so-called multiple holding.The mutual holding between the family and Company A is cross holding.The so-called compound voting right means one share with multiple votes, rather than the traditional one share with one vote.In addition, the family will also appoint their relatives to serve as managers of listed company D, further strengthening their control over the listed company. Because their sample range is too small, I published an article in 2000, namely Claessens, Djankov, Lang (2000), which conducted an in-depth study on the ownership structure of East Asian countries and regions.I analyzed a total of 2,980 companies, and concluded that 2/3 of them are controlled by shareholders with concentrated ownership, and most of them are families. More than 60% of the managers of family holding companies come from the controlling family.Large families controlled vast amounts of wealth at the same time.For example, a family in Indonesia controls 16.6% of the market value of the entire stock market, and a family in the Philippines controls 17.1% of the market value of the entire stock market.In Hong Kong and South Korea, 10 families control nearly 1/3 of the stock market capitalization.Family power has a decisive influence in East Asia (except Japan), and East Asian countries have also made extensive use of the above-mentioned pyramid-style holding structure to strengthen control over listed companies. In addition, in 2002 [Faccio and Lang (2002)], I made an in-depth analysis on the final ownership structure of 5,232 listed companies in 13 Western European countries.I found that only the United Kingdom and Ireland have more publicly held companies, while other continental European countries are dominated by family holdings. 54% of European companies are controlled by large shareholders with concentrated equity (family-based), and two-thirds of family-owned companies assign their relatives to serve as managers of listed companies.However, the proportion of market capitalization controlled by large families is significantly lower than that of East Asian countries.Compared with East Asian countries, Western European countries use less pyramidal holding structure, cross holding and multiple holdings, but more use of multiple voting rights. I completed another thesis in 2005, Gadhoum, Lang, Young (2005).The article pointed out that the United States is not completely controlled by the public as we think.Our research found that 59.74% of the listed companies have large controlling shareholders, and this ratio is even higher than that of Japanese listed companies with 58% controlled by major shareholders of banks.Moreover, 36% of listed companies in the United States are controlled by large families, which is similar to the 37.26% in Germany, but far higher than that of large families in Japan, France, and the United Kingdom.We also found that 24.57% of US listed companies are controlled and operated by large families, which is even higher than Asian companies. 16.33% of US listed companies are controlled by financial institutions, and this proportion is similar to the proportion of European listed companies controlled by financial institutions. The aforementioned papers clearly demonstrate that East Asia (excluding Japan) and Western Europe (excluding the UK and Ireland) have fairly high ownership concentrations.Basically, it is consistent with the description of the above-mentioned equity concentration phenomenon in Eurasia and other countries.Contrary to the corporate governance structure in the United States, the problem in the United States is the conflict between small shareholders and managers, but the strong supervision of the US government protects small shareholders.But can these other countries with concentrated ownership protect small shareholders?These large shareholders with concentrated equity are different from small shareholders. Although they can effectively control listed companies, they have no way to disperse the risks brought about by the concentration of equity. The occurrence of conflicts among small shareholders. Grossman, Hart (1988), Harris, Raviv (1988) put forward a theoretical explanation, because the existence of the pyramidal holding structure results in the separation of ownership and control, which makes large shareholders have the motivation to violate small shareholders.But so far, there are not many confirmed studies in this area.Among them, the stocks with double voting rights have a large premium when they are traded.For example, Israel's premium is 45.5%, Sweden's is 65%, Switzerland's is 20%, and Italy's is 82%, but the value of the United States is lower than the above countries.Thus proving that the exploitation of minority shareholders in the United States may not be so serious. In addition, Morck, Shleifer, Vishny (1988b), Stulz (1988) and McConnell, Servaes (1990) all explored the impact of US corporate ownership concentration on corporate value.When the manager's equity slowly increases, the company's value will increase.But after a certain stage, the increase of managers' equity will cause the phenomenon of exploiting small shareholders and make the company's value drop.Because there is almost no pyramidal holding structure in American companies, there is no way to clearly separate control and ownership in the study of them. Claessens, Djankov, Fan, and Lang (2002) also used data from East Asia to clearly separate ownership and control.Taking Figure 2 above as an example, if the family exploited 100 yuan from small shareholders of company D, but since the family is also a shareholder of D, they will definitely suffer losses.But their loss is only about 7 yuan (100 yuan X51%X51%X51%X50%), so the family can gain 93 yuan.Therefore, the article points out that if the ownership and control of listed companies are more separated, the possibility of minority shareholders being exploited will increase, and the company's value will be lower.This article should be regarded as the first to test the theory of exploitation, and it shows that the separation of family ownership and control has the greatest loss of firm value. In addition, I [Faccio, Lang, Young (2001)] also confirmed that the more separation between ownership and control, the less dividends the minority shareholders of Company D will receive.But the situation in Europe is much better, and small shareholders of D company can also receive higher dividends.Moreover, the second largest shareholder in European companies has played a role in protecting small shareholders, but the second largest shareholder and the largest shareholder in Asian companies often jointly exploit other small shareholders. In addition to small shareholders, the company also has creditors.I first ask a question - do creditors need a corporate governance structure to protect their rights and interests like small shareholders? Creditors in the United States, the United Kingdom and Canada can be divided into two types, the first is banks, and the second is small creditors holding corporate bonds.Banks are divided into individual bank loans and syndicated bank loans (Syndicated Bank Lending).The banking systems in Asia and Europe are relatively complex, among which the German Universal Bank System and Japanese trading company holding banks are the most representative.Most of the banking systems in other European and Asian countries are linked banks controlled by so-called families. Creditors are different from small shareholders.Whether it is a large bank syndicate or a small creditor, they will get more legal protection than small shareholders.Moreover, the debt contract is very clear. If you fail to repay the principal or interest, it is a very clear breach of contract. The court can clearly make a judgment in favor of the creditor when judging the case.Therefore, in a region with good rule of law, such as Europe and the United States, creditors basically do not need the protection of corporate governance.But in Asia, it is imperative to establish a corporate governance mechanism to protect creditors. Let's compare the rights of small shareholders and creditors: 1. There is no guarantee for the investment of small shareholders, but the investment of creditors is guaranteed by law. 2. Minority shareholders do not have the right to distribute the company's assets, while creditors have this right. 3. There is no time limit for the investment of small shareholders, but there is a certain time limit for the investment of creditors. When the borrower does not pay interest on time, individual creditors, regardless of size, can sue for liquidation and use the borrower's assets to pay off the debt.Moreover, any creditor, whether it is a bank or a small creditor holding corporate bonds, can seize assets to pay off debts.When the laws of various countries face this problem, they cannot object in principle but can only ensure that individual creditors cannot seize assets exceeding their own claims.Moreover, unlike small shareholders, small creditors have greater rights, because in the case of a borrower’s default, it is easier for the borrower to communicate with the bank than to communicate with small creditors, because there are too many small creditors, and it is difficult to reach a consistent conclusion. Negotiating with banks is much easier [cf. Gilson, John, Lang (2000), Gertner, Scharfstein (1991), Bolton, Scarfstein (1996)].This is also an important reason why corporate bond markets exist only in a few developed countries. Because small shareholders have the habit of hitchhiking, unlike small creditors, individual small shareholders have no power to protect themselves, unless small shareholders can form large shareholders or form large shareholders through mergers.In this way, major shareholders can make various corporate decisions.However, the major shareholders after assembly are far less powerful than creditors to protect themselves. If the borrower defaults and the creditor immediately seizes the assets according to its legal rights, then the rights and interests of the shareholders will be threatened immediately and there is no way to protect themselves.Maybe a certain company is still doing well—it's just temporarily struggling.In the United States there is so-called bankruptcy protection.Company managers or creditors (including raw material suppliers) can declare that the company has entered the "Bankruptcy Code" protection or simply declared bankruptcy.But this kind of bankruptcy is different from the so-called bankruptcy in China. Our so-called bankruptcy means closing down, while the so-called bankruptcy in the United States means continuing to operate under the protection of the bankruptcy court.What the Chinese call a bankruptcy is called a liquidation in the US. When a company enters bankruptcy proceedings, the automatic stay clause (Automatic Stay) takes effect immediately, and creditors are not allowed to seize the company's assets, and they do not even have to pay interest or principal with the consent of the court. Everything will be discussed after the company leaves the bankruptcy protection . When the company declares bankruptcy, not only the creditors suffer losses due to failure to obtain collateral, but shareholders also have to pay a considerable cost.According to the estimates of Warner (1977), Gilson, John, and Lang (2000), during 1933-1955, in the sample of 11 bankrupt railroad companies in the United States, the average direct cost was 5.3% of the company’s market price at the time of bankruptcy proceedings . During the period from 1963 to 1979, the average and median direct bankruptcy costs of several companies accused of bankruptcy in the Western District of Oklahoma were 7.5% and 1.7% of the total liquidation amount, respectively. Among the 37 firms charged with bankruptcy in 1980 and 1986, the average direct bankruptcy cost was 2.9 percent of book value of assets.When a poorly managed company has a financial crisis, it will pay the cost of the financial crisis even though it has not yet gone bankrupt.But this cost is much lower than the direct cost of bankruptcy. In the sample of 18 firms, the average and median direct financial distress costs are 0.65% and 0.32% of book value of assets.As for indirect bankruptcy costs, it is difficult to estimate. Because the cost of bankruptcy is relatively high for creditors or shareholders, not many companies in the United States have entered bankruptcy protection. Table 1 details how companies deal with difficulties. We found that only about 5% of companies declared bankruptcy [see John, LangNetter (1992)]. According to my [Gilscm, John, Lang (2000)] research, private settlement is the first choice after a company encounters difficulties, rather than declaring bankruptcy.Because private settlement costs are much lower than bankruptcy costs.Private settlement expenses account for only 0.65% of total assets, while bankruptcy expenses account for 3% to 7.5% of total assets. The specific method in the United States is that the company manager first talks with creditors.Creditors organize a committee whose members include representatives of 4-5 largest creditors and 1-2 small creditors.Such meetings are usually coordinated through the National Association of Credit Management.Table 2 details the specific measures for successful private settlements of US companies. It can be seen from Table 2 that the company's debt extension is the least, only 6.7%, and most of them are formed by converting into stocks, accounting for 86.7%.The process of converting bonds into stocks is called an exchange offer, and it is a very common practice for companies that are currently experiencing difficulties.Most companies have bank loans, and a small number of companies issue corporate bonds.Therefore, most of the reorganization is carried out through bank loans, and corporate bonds are more difficult to restructure, which is one of the reasons for the low proportion. If the company meets the following three conditions, it is easier to complete a private settlement, otherwise it must declare bankruptcy: 1. If the company has fewer types of bonds in circulation, the settlement is easier to succeed, because the more small creditors, the more difficult it is to negotiate. 2. The higher the ratio of bank liabilities to total liabilities, the easier it is for the reconciliation to succeed, because it is easier for banks to negotiate. 3. The higher the ratio of the company's market price to liquidation value, the easier it is for the settlement to succeed; otherwise, the market value loss of the company declared bankrupt will be greater. If companies had to declare bankruptcy, could their business performance be improved?Table 3 shows the return on assets of 197 US companies in the first five years and the last five years after they declared bankruptcy in the 1980s [see Hotchkiss (1995)]. We can clearly see that when companies emerge from bankruptcy, their operating performance is not at the same level as it was three years before entering bankruptcy.This seems to indicate that it is difficult for sunset companies to recover through bankruptcy protection.However, small shareholders can continue to cash out in the secondary market without getting nothing; and creditors can also recover their claims, which is the benefit of the bankruptcy law.But almost no other country in the world has bankruptcy laws like the United States. The U.S. banking system is simple, with a single bank.But creditors in the United States do not only refer to banks, but also include a large number of bondholders.Some studies [Jensen, Meckling (1976)] point out that if shareholders have the ability to influence corporate decision-making than creditors, shareholders may also exploit creditors.For example, shareholders require managers to invest in high-risk projects.If the project is successful, the stock price will rise sharply to benefit shareholders; if the project is not successful and the company goes bankrupt, the creditors will get nothing. From another perspective, if the creditor has the ability to influence the company's decision-making, he is likely to ask the manager to give up some high-risk but very profitable projects [Myers (1977)].This is not good for shareholders. Of course, there are other studies that have also explored the issue of shareholders exploiting creditors.For example, when RJR Nabisco, the American Camel brand cigarette manufacturer, conducted a management buyout (Management Buy Out, MBO), the price of the bonds issued by the company immediately plummeted.One of the largest bondholders International Communications (ITT) also sued RJR.However, according to a large-sample survey [Asquith, Wizman (1990)], this phenomenon of exploitation does not seem to be significant.As for whether shareholders may harm labor through mergers or other means, Bhagat, Shleifer, Vishny (1990), Rosett (1990), Pontiff, Shleifer, Weisbach (1990) and others could not find sufficient evidence. All in all, according to the research in the United States, is there any mutual exploitation among creditors, shareholders and labor?We may be able to find the answer from a few cases, but the large-sample survey did not provide a clear answer. But based on the experience of the United States, Jensen (1986) put forward an interesting point of view, that is, after the company borrows too much, it can actually make the managers work harder. hit.Therefore, judging from the experience of the United States, more borrowing is good news for shareholders.But another point of view is that creditors may prohibit managers from raising funds to invest in good projects in order to protect their own interests, or liquidate their companies to ensure creditor's rights, which is unfavorable to shareholders [see Stulz (1990), Diamond ( 1991), Harris, Raviv (1990), Hart, Moore (1995)].However, according to the research of Lang, Ofek, and Stulz (1996), we found that the excessive investment of bad companies will be reduced due to debts. Therefore, for shareholders, more debts are a good thing. Unlike in the US, banks play a special role in Germany and Japan, rather than bondholders.Therefore, one of the two countries that academic circles usually talk about is Germany and the other is Japan.We use the following two figures to illustrate.One of them is Deutsche Bank (Deutsche Bank) is the ultimate controlling shareholder of Jiaodong; the other is Japan's Fuji Bank (Fuji Bank) is also the ultimate controlling shareholder. Taking Deutsche Bank as an example, the entire group includes Dresdner Bank, Bayerische Vereins Bank, Allianz and MR Bank (Muechener Ruekvericherungs), Mercedes-Benz ( Daimler Benz).The holding relationship between these banks can be said to be extremely complicated, and it cannot be explained clearly in one or two sentences.These banks have a firm grip on the companies within the group.We simplified these complex graphs and drew the relationships of these banks on the graph (Figure 4).We see that the Deutsche Bank Group basically has cross-shareholdings, such as the cross-shareholding between Dresdner Bank and Allianz Insurance Company, the cross-shareholding between MR Bank and Allianz Insurance Company, and so on. In addition, taking Fuji Bank of Japan as an example, the entire group includes Yasuda Trust Bank, Kanto Bank and Daito Bank.These banks also have a tight grip on the companies within the group.We do not observe cross-shareholdings among Japanese banks (see Figure 5). According to Rajan's (1992) theory, if the controlling shareholder is a bank, creditors have more incentives to exploit shareholders because they have more information.So what is their method of exploitation? Weinstein and Yafeh (1994) found that Japanese holding banks charge higher interest for companies within the group than for companies outside the group.Moreover, Hoshi, Kashyak, and Scharfstein (1993) pointed out that when Japan’s financial regulations were relaxed and companies were allowed to issue bonds directly to the capital market, they observed that quite a few high-net-worth companies immediately switched to issuing bonds instead of borrowing from banks within the group up.This proves that the cost of borrowing money from banks within the group is much higher than the cost of issuing bonds.And Franks and Mayer (1994) did some case studies in Germany.They found that German banks interfered with other companies' acquisitions of their client companies because they were worried that the good relationship they had established with customers in the past would be destroyed, and the opportunity to make money would be lost for nothing.But Gorton and Schmid (2000) doubted this statement.In general, however, there are too few studies on whether creditors exploit small shareholders to draw clear conclusions. If we don't talk about exploitation, is it possible for creditors to strengthen the supervision of corporate managers to benefit shareholders?Taking Germany as an example, German banks basically have cross-shareholdings, such as the cross-shareholding between Dresdner Bank and Allianz Insurance Company, and the cross-shareholding between MR Bank and Allianz Insurance Company.The purpose of the cross-shareholding is simply to benefit the managers.For example, if Dresdner Bank and Allianz Insurance have different opinions, managers can use shareholders who are beneficial to them to attack shareholders who are unfavorable to them.And because the two parties have the same shareholding, neither party can be sure of winning.So you have to join forces with the manager.Managers are thus a safe bet in the German banking system.But they have little interest in supervising client companies, they just want to improve customer relations and make more money [see Edwards, Fischer (1994), Dewatripont, Maskin (1995), Gertner, Scharfstein, Stein (1994)] . For Asia, not only does debt fail to benefit small shareholders, but it is a tool used by big families to exploit small shareholders or creditors. This is a case of Thailand.The big family sold a piece of currently worthless land to listed company D at a high price of 100 baht. D took the land and went to his affiliated bank to seek a bank guarantee of 100 baht.Although Thailand's financial authorities have strict restrictions on individual or family holdings in banks, the family's holdings in Bank F may only be 4%, but the bank's CE0 is a relative of the family.After obtaining the bank guarantee, Company D borrowed the equivalent amount of US dollars from foreign banks such as Citibank of the United States.This phenomenon is very common in Thailand.This is why the depreciation of the Thai baht in half during the financial crisis in 1997 had such a big impact in Thailand.Because company D went bankrupt, bank F also went bankrupt without paying any money.The foreign bank knows that the money has gone to the big family, but there is no way to recover the money.Since company D is a joint stock limited company, it only bears limited liability for debts, so foreign banks cannot recover money from those families at all.In the end, it also depends on the intervention of the International Monetary Fund, requiring the Thai government to raise taxes and pay back the money to ordinary people across the country.Therefore, the big family not only exploited the small stockholders, they even exploited the small people together.Since the Thai government needs the support of the big family, it is impossible for the Thai government to turn against the big family for money for the taxation of the people. It is also common for Asian families to control banks.Take, for example, the big family of Lucio Tan in the Philippines. They colluded with the Philippine government to get the Philippine National Bank (Philippines National Bank), and they put the bank at the bottom of their pyramid holding structure.Immediately after he took control of the bank, the Philippine National Bank became his personal affiliated bank.他要求该行贷款15亿美元及8亿美元给他两家金字塔的上层公司——亚洲酿酒公司（Asia Brewery）和菲律宾航空公司（Philippines Airline）。 其他亚洲家族剥削银行的例子简直不胜枚举。例如，印度尼西亚当局规定行不能核准超过10%净资本金的贷款予其关联企业，但1995年安瑞可银行（Anrico Bank）对其关联企业放贷了1925%净资本金的款项。1998年印度尼西亚拿撒林（Sjamsul Nursalim）家族命令其控股的但根银行（Bank Dagang National Indonesia）将其76%的贷款贷给关联企业，而其中96%的贷款最终变成了坏账。1988年，菲律宾东方银行（Orient Bank）破产后，监管部门发现75%的银行贷款均贷放给了控股家族公司的董事及其朋友。 而且我的研究［Faccio、Lang、Young（2007）］发现亚洲家族善于玩弄金字塔式控股结构而滥借狂借，坑害银行及小股民。而欧洲公司虽也是金字塔式控股结构，但滥借现象却有着相当程度的控制。 就亚洲而言，由于C拥有上市公司DD的股权相当少，外界很难知道DD是该家族的关联公司。而且DD又是金字塔结构中最下层的公司，因此家族通过关联贷款由其控股银行F大量贷放给上市公司DD。后再通过与家族间的关联交易将钱转向家族若发生了金融危机，DD倒闭与否对家族并不重要，因为现金已经被掏空，而且DD又在最下层，所有的损失A对于大家族而言仅仅是AX51%X51%X51%X3%=AX0.4%，因而实际数目变得非常小。 Faccio、Lang、Young（2007）的研究发现亚洲地区的家族公司常常会利用关联交易用关联银行的资金投资于风险较大的项目。此种拿银行的资金投资于风险大的项目的现象在欧洲也是较普遍的，但和亚洲不同的是他们并不是利用关联交易进行的。欧洲的情况也不太一样，类同于银行F及上市公司DD的结构相当少。而且银行对于上市公司D和DD的贷款都很谨慎，因为它是在金字塔的最下层，风险太大。我在前面也谈过德国银行的经理人对本身的权力很有兴趣，但他们不太愿意监管客户公司，因此欧洲银行为了确保债权而不太愿意贷款给上市公司D和DD。 问题是为什么亚洲国家的银行体系和其他国家那么得不一样呢？为什么有那么多的家族涉及关联银行。我们前面曾经谈过亚洲各国制度落后和政府腐败等等。在这种落后的制度下，虽然形成了家族企业，但家族企业却无法轻易地得到独立银行的融资。因为当时没有好的法制确保债权，因此你借不到钱，你也不敢借钱给别人，因为大家都担心对方不偿还。这个现象与今天中国的某些情况相当类似，这也就说明了为何中国一些大企业例如德隆系和刘永好为何积极收购深发展和民生银行。这种背景形成了亚洲国家特有的家族关联银行。利用图6、图7说明亚洲的家族控制上市银行的比例并与欧洲相比，我们发现大部分的亚洲上市银行都是家族控股其中又以中国香港、印度尼西亚、马来西亚和泰国等最为严重。而欧洲的家族控股比例显著地少于亚洲。这些证据清楚地说明了亚洲家族控股银行问题的严重性。