Research On Tunneling Behavior Of Listed Companies In China

Tunneling, which means the expropriation of minority shareholders, by transferring assets and profits out of firms for the benefit of those who control them, has caught wide attentions since its first coming up with by Shleifer. It might cause serious consequences if it were widespread, given the fact that was hard to detect. Since the outside investors can't receive profits merited, they will be frustrated in investing, that will get in the way of capital market's growth . And illegal tunneling with evil motivation would probably disrupt the financial data, made the recongnization of enterprise risks unavailable. Worse still, in the process of China's reform, the complicated agency problem of SOE (state-owned enterprise) might leave room for those who would take advantage of tunneling, to possess country's assets, thus endanger the safety of nation's treasure.Then what's the evidence of the tunneling situation in China? Who were tunneling? What's the characteristic of those who might commit ill-will tunneling? Are they state-owned equity or private ones? The answers to those questions lie in the heart of tunneling detection and refrain.But limited information made the past research unable to detect the ultimate owner's manipulation of the whole group's benefits'transport.Since 2004, all listed companies in China have been required to illustrate the ultimate controller and relationship graph, which made realization of both the ultimate owner and its tunneling behavior more feasible. We analyzed it and answered those questions above.We found the evidence of tunneling in China's public company, and there are strong relationship between the cash-flow rights of controlling party and its tunneling motivation, the less cash flow rights it possessed, the stronger motive of tunneling; there also existed propping. Nature of ownership is another important issue in tunneling behaviors; SOE would be more inclined to tunneling than non-SOEs.Our research mainly consisted of 4 parts:First, we looked back on literature, before coming up our research focus, to make a clear picture of how research evolve on to today's topic, ended by brief introduction of our research design.Second, analyzed the tunneling behavior manipulated by ultimate owner theoretically.Third, in the major part of this thesis, we tested our theory by econometric technology, using data from China's Hu and Shen Stock market.Forth, followed by is the analysis of the mechanism of our findings, by coining economic model and the concept, private benefit of agents.; ended up with conclusion of the whole research, provided suggestions for custody, and illustrate the limits of this paper.