| The controlling shareholder’s propping is one of the most hot areas of research on corporate financial in recent years. In the initial research framework, propping may be an important part of how firms operate in countries with weak legal environments and propping occurs when there is a negative shock to themacroeconomy. Purpose is to enhance the performance of listed companies to avoid default, delisting or bankruptcy, the controlling shareholder prop up companies in the opposite direction with tunneling; it is also known as negative tunneling, so tunneling and propping are basically symmetric behaviors.However, foreign literatures have certain limitations due to entirely dependence on a priori classification about the legal environments and institutions of emerging markets.Domestic researchs on controlling shareholders’propping of listed companies in China based on the institutional level are still relatively weak. China’s emerging and transitional institutional environment and securities practice provide a natural scene for us to examine the propping behaviour from the perspective of institutions matrix.Firstly, this paper clarifies the background and significance, and establishes a framework for ideas and research. Then, with this analysis and comments on the literature relevant to the subject, this paper find foundation for the innovation, but slso defines measurement methods of the main varibles, empirical model and control variables. Secondly, from the modern corporate contract theory, behavioral theory of the controlling shareholder and the internal capital market theory and other aspects reinforces the main theoretical basis of this article, along the the main line of research Berle and Means pioneered LLSV developed, analyzes research paradigm and content evolution of the company’s agency problems. In addition, summarizes share-issue and ST regulation in China’s securities market, which made the background for the study. These institutional arrangements made listing become a valuable "shell" resources, China’s major shareholders control of listed companies and "dominance" is the objective conditions for controlling shareholder’s behavior existing.Then, this paper makes empirical analysis based on China’s stock market listed companies data in recent years, according to the logic of the system-behavior, using univariate testing methods, OLS, variable interaction effect of test model and TSLS and other kinds of econometric models and case study methods,from large institutional analysis framework demonstrates the external intervention effects of the political institution, the stock market institution for opportunistic effects and effects of rent-seeking of internal stucture on the controlling shareholder propping, confirms that the business group acts as a substitute for external institution and plays a role of internal capital allocation. This paper focuses on the behavioral effects of the institutional analysis, and research findings have some theoretical value and practical significance.Through theoretical and empirical research, this paper obtaimed the following conclusions:To begin with theoretical analysis of the role of government from two perspectives-political and development concept, empirical results show that the existence of government intervention effects on controlling shareholders to prop. Sub-sample test results show that the different property rights nature of controlling shareholders results in some differences, the positive correlation between overstaffing and the state-owned controlling shareholder propping is not significant, and the correlation between GDP, financial market variables and the private controlling shareholders propping not significant, and there is a significant correlation between all explanatory variables and the local government controlling shareholders propping.As the controlling shareholder has a huge potential benefit in the equity refinancing. Therefore, the controlling shareholders has the motivation of propping up earnings management, is also based on, so the propping of earnings management is opportunistic due to consideration of the opportunity to reissue. Empirical results confirm the controlling shareholders’propping up earnings management hypothesis and opportunistic propping hypothesis.To avoid losing listing status and to prevent the spread of financial crisis within the group, the controlling shareholder has incentives to prop up the turnaround of affiliates in distress. Empirical results show the correlation between ST status and assets recombination frequency is significant, and also asset acquisitions, divestitures, debt restructuring, asset conversion. As the controlling shareholders’shell-protection motivation exists, the controlling shareholder through internal capital markets within the group to rescue the company, socalled a surplus spillover effects in business group.Manager lobbying power influence behavior of controlling shareholders. This paper constructs manager lobbying power index based on following information:tenure, time-in-position, whether the manager is listed as one of firm’s executives, and membership on the firm’s board of directors. The empirical results show that the larger managers lobbying, the stronger the manager lobbying power relative to other members, and thus the greater impact on propping of the controlling shareholder of the group and the allocation of resources.To begin with function of substitute for innovation institution in emerging markets and organizational role business group plays, empirical study shows that R&D investment in group-controlled private high-tech listed companies is sensitive to cash flow and insensitive to external equity financing; By cash flow constraints internal capital market for affiliates to obtain more financial resources play a fundamental role in the system; Listed companies within the business group R&D investment with internal funds obtained increases, the controlling shareholder proping will increase with the rise in ownership.Finally, this paper points out that government intervention inemerging markets should focus on distributive justice and contracting freedom, it should be noticed that the path dependence on propping from controlling shareholder for listed companies in the process of growing and the free-rider problem in internal capital market. |
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