Study On Tunneling Of Controlling Shareholder Base On Corporate Government

Since "Tunneling" or "Entrenchment" was put forward by Jonsohn in Last Century, scholars have begun to explore "Tunneling" in our country, on the other hand, some scandals revealed by the supervisor offered further evidences, "Tunneling" is even more severe in our country than in other countries. This paper try to tell how this happens in eye of inside company governance, therefore, set apart what are the valid and what are invalid.In the method of canonical and positive research, this paper focus on the two questions: First of all, the thesis explores the characters of "tunneling" of our country. Using date of all related transactions from 2003 to 2005, this paper disentangles who and how carry out "tunneling", and, how severe it is. By classification, some obvious characters of the companies relating to tunneling are found; Second, this paper keep eyes on the research of causes and consequences. the relations between "Tunneling" and company governance are set up by theoretical analyses, meanwhile, some variables are abstracted, and base on which positive research is finished. In all, the paper starts from parts, ends with the aggregation with the sample of shanghai stock exchange. There are several conclusions are drown as following:1. Most of the related transactions are between the listed companies and their controllers. Related purchase and sale is the most frequent method, while guarantee and fund-offering are most severe in quantity. According the classify of the industry, guarantee and related purchase and sale both are blossom in manufactory and excavating industry, while in the other industries, the former is outstanding; the condition is another crucial factor, in Special Treated companies, Related purchase and sale is less, but the transactions respecting fund are busy. The difference is also exposed in eye of the nature of the final controllers, the state-owned companies are more powerful in absorbing financial funds, while private companies relay on related parties even more. It prefers the prior period to the present period that incurs peculated fund.2. There are different preference between the different controllers, companies controlled by nature person prefer more complicated control structure by more layers and multiple shareholders, in turn, a bigger wedge of ownership and control is made. therefore, a severe tunneling action will be executed in this companies in theory, but the fact is that it happens in companies without nature person controllers. The conflict conclusion can be explained by the control ability. Reviewing the frequency of the tunneling, the companies with nature person controllers tends to incur the expropriation from final controller, while the companies without nature person controllers tend to incur the expropriation from immediate controllers.3. In all, the structure of shareholders in our country has a character of high centrality and low equilibrium, and the shares of other holders decline with a rapid speed while the share of the largest holder increase. There is a substituting-effect between the stated-owned shares and corporation-owned shares, It is several main shareholders who influence the liquidity instead of the largest holders and stated-owned holders. Exterior and liquidity have the same influence on both stated-owned and nonstate-owned companies. The external investors hold less shares in expropriated companies, and expropriated companies have higher liquidity. The concentrated hold has contrary effects on stated-owned and nonstate-owned companies, the former take on "incentive effects", the later present "entrenchment effect". The concentrated shareholder is convenient to immediate controllers to expropriate, and dispersive holders is convenient to indirect controllers to act.4. Under the present control structure, the rights of minority shareholders has little meanings in fact. The shareholder's meeting is manipulated by controlling shareholders, few minority shareholders has no motivation to participate the meeting, the voice from minority shareholders is too weak. The institution to enhance the governance of the listed companies is becoming rounded, the space left for controlling shareholders is smaller and smaller, An incline to strengthen control on management directly begins to turn up. Independent director act a important role in those days, this can be seen in less absent and more disagree opinions. Besides, audit committee and the sites of the independent directors show the significant function too, both the date from 2004 and 2005 support the conclusion. The aggregated regression on tunneling or not shows that the development space, ability of payment and the industry also have significant influence. The results of regression on degree of tunneling reveals that the share of the largest shareholder and the members of independent each has negative and positive influence.At last chapter, this paper give some advices on keeping back expropriation from controlling shareholder, just as following: (1) Establish laws on group corporation; (2) Limit the cross-holdings and disclose the related shareholders completely; (3) Promote the participation of minority shareholders; (4) Practice the rule of dual-class shares; (5)Improve on the structure of board and enhance the liability of the independent directors further more; (6) Complete the institution of professional committee, especially the audit committee in order to strengthen the ex post facto monitor; (7) Adopt the duty principle of result instead of action in legal grievance. (8) Build secret channels between the employee and the governance layers.