Research On The Motivation And Economic Consequences Of Controlling Shareholders’ Hollowing Out Behavior Under Continuous High-premium M&A

With the advent of the Internet era,the operation of many real companies is deteriorating,especially for traditional industries,which not only lose market dividends,but also gradually reduce policy support,and the development prospect of the company is in danger.In order to seek sustainable operation and break through the bottleneck of development,the company will choose the strategic decision of diversification through internal growth or outward M&A to find new profit growth points.As the wave of mergers and acquisitions advances,many traditional industries have crossed over into new fields by way of mergers and acquisitions.Generally speaking,companies choose cross-border M&A in order to diversify their business,reduce risks,improve performance and increase corporate value with a view to achieving synergies;however,there are also phenomena in the capital market where controlling shareholders use M&A activities to capture excess returns,breeding short-selling and market manipulation.Although the common ways of short selling in the capital market are gradually regulated,there are new ways of short selling,such as using high premiums for M&A activities.The real purpose of M&A activities is hidden inside and difficult to be discovered by the regulators,thus the regulatory loopholes are gradually becoming one of the factors that allow shareholders to run short selling or market manipulation,and if combined with other operational means,the controlling shareholder’s short selling behavior will seriously affect the development of the enterprise.Therefore,this paper analyzes how M&A activities become a means of controlling shareholders’ short selling behavior in the form of a case study,as well as the causes and economic consequences of controlling shareholders’ short selling by using M&A.Finally,it summarizes the lessons of controlling shareholders’ short selling behavior and proposes feasible governance countermeasures in order to bring the shareholders’ capital operation methods back to serving the real enterprise economy rather than shareholders’ personal interests.This paper selects a basic chemical company,Lianchuang,for a case study.The controlling shareholder of the acquirer,Lianchuang,aims at maximizing its own value by acquiring assetlight enterprises,using the income approach to make the valuation of the target high,making high premium mergers and acquisitions,stimulating the share price to rise,and claiming to improve the economic difficulties that the company is currently in externally.Therefore,the controlling shareholders use the rising stock price to precisely reduce their holdings at a high level,pledge a high proportion of equity to finance,and buy and sell corporate assets at a high level through connected transactions to hollow out the listed company,thus damaging the rights and interests of other stakeholders.In this paper,we will analyze the impact of controlling shareholders’ emptying behavior on the company by using financial index analysis method and entropy method.Finally,lessons are summarized and governance suggestions are proposed,such as requiring and supervising both M&A parties to reasonably price the underlying assets and investors to pay attention to the goodwill and performance commitment period of the companies,in the hope of further protecting stakeholders’ rights and interests and promoting the sustainable development of the capital market.