A Research On The Impact Of Debt Financing Over Tunneling Of Controlling Shareholders In Listed Companies

The traditional corporate governance theory is based on dispersed ownership and relationship of the owners with managers-entrusted with the agency relationship. However the dispersed ownership is not universal phenomenon, the shares of listed companies in most countries and regions including China are not dispersed but quite concentrated. In the companies with quite concentrated ownership, the main agency issue is no longer the conflict between shareholders and managers, but the controlling holders occupy the interest of minority shareholders and uptake the private benefits by the control right. Especially in emerging markets, the conflicts of interest are particularly serious, due to the unsound system for protection of small shareholders.Currently the study of tunneling of controlling shareholders focuses on the ownership and the independent directors and so on, while ignoring the effect of debt financing of governance. Tunneling of controlling shareholders affect the interests of companies, thereby affect the interests of creditors. So they have incentive to supervise large shareholders' behavior. Debt funds in the capital of listed companies in China occupy a large proportion, but the effect of debt financing of governance did not enough attention. Therefore, this paper main study that debt financing on effect of tunneling of controlling shareholders and combine China's nation conditions to give advice.To study debt financing how to effect of tunneling of controlling holders has important theoretical value and practical significance on help to analysis tunneling of controlling holders of listed companies in China, help to adopt reasonable arrangements through debt financing to achieve the purpose of protecting the interests of outside investors, and have a positive effect to improve the external policy environment of listed companies and create a better stock market.By reading many classic literatures about tunneling of controlling shareholders and debt financing, this paper makes a groping research on debt financing how to effect of tunneling of controlling holders which is based on the former studies. First using of the asset-specific theory to explain tunneling of controlling shareholders, this paper concludes that tunneling may injure the benefits of creditors, so they have incentive to supervise large shareholders'behavior. And then we form the overall level of corporate debt financing, debt maturity structure and different type of debt financing these three angle, analysis their impact on tunneling of controlling shareholders. We regards all the listed companies except financial companies of Shanghai and Shenzhen bourse from 2005 to 2009 as the sample, and used the controlling shareholder occupying capital to measure tunneling, establishes multivariate regression models, adopts the methods of regression to verify the impact of the overall level of corporate debt financing, debt maturity structure and different type of debt financing. The results indicate that:firstly, the degree of tunneling is 4.02%; secondly, in listed companies, the higher the overall and short-term leverage, the greater the degree of tunneling, meanwhile debt from banks, suppliers and employee can deter tunneling.Finally, the specific situation of China's listed companies, this paper makes the following recommendations:Maintain the appropriate level of debt; Improve the bankruptcy system; Accelerate the development of China's bond market; Accelerate the reform of state-owned banks.