Study On Tunneling From Related Party Transaction About Listed Companies In China

For the special way to be listed in our country, there are many kinds of relationship between listed companies and its parent companies. Under the background of having one large stockholder in listed companies, the controlling shareholder can use his special right to influent list company's management, in order to expropriate the cash and profit of list companies. These actions damage the benefit of other shareholders. We definite these actions as tunneling from related party transaction. That's to say, tunneling from related party transaction means controlling shareholder use the unfairly part transaction with list company to expropriate the cash and profit. Because of unsymmetrical information, much illusive information and overfull venture in securities market, the related party transaction occur frequently. At the same time, complicated ownership structure, highly centralized state shares, few circulating shares in listed companies, lower efficiency of parent companies and faulty law give the chance to tunneling from related party transaction. There are two kinds of tunneling from related party transaction, tunneling from related party transaction in operation and tunneling from related party transaction in capital recombine. Using the theoretic model, the paper conclude that at the same conditions, more perfect law and more perfect corporate governance will give better protection to shareholder with a few shares, and under the same conditions, the picture of the expropriation by the controlling shareholder with the shares of controlling shareholder is a reversal 'U'. Based on the data of listed companies suiting study, this paper tests the expropriation by controlling shareholder in public companies. The results show that the connection between the expropriations by the controlling shareholder with the proportion of controlling shareholder is a reversal 'U', the expropriation by the controlling shareholder is significantly negative related with the shares of the second shareholder, and the expropriation by the controlling shareholder is significantly positive related with the rate between debt and asset. At last, the paper suggests several measures to stop tunneling from related party transaction, such as improving the lever of the company which will be listed, perfecting relational law, promoting the demand level of accounting information, perfecting accounting the disclosure system, reducing the shares of controlling shareholder, adding the shares of the second shareholder and establishing the protective organizations for investor's equity.