The Suppression Effect Of The Reform Of Non-tradable Shares On Tunneling

The "tunneling" acts of the major shareholders invasion to the small and medium shareholders'interests is a leading issue, so that the academy launches an in-depth study and discussion centering on the issues such as behavioral characteristics and constraints of the "tunneling" acts. The Reform of Non-tradable Shares is a revolution of changing the share-trading phenomenon of the Listed Companies'"the same share but different rights" in China, and its purpose are to achieve the full circulation of the shares, to improve the management environment of the China's Listed Companies, and to protect small investors'interests. The theme of this paper is formed by the combined study of"the Reform of Non-tradable Shares"and the "tunnel" acts. We use the shareholding structure as a bridge to link their relationship, for the equity structure affecting the "tunneling" acts while the Reform of Non-tradable Shares affecting the ownership structure. Through this link we discuss the share reform's containment effects on the major shareholders'"tunneling" acts by empirical research methods.This paper is divided into six parts, first establishing the basis of this paper through the demonstration of the previous studies, and then using the latest data to make empirical testing based on the theoretical exposition in view of this paper, finally getting the conclusion: the Reform of Non-tradable Shares has obvious containment effects on the major shareholders' "tunneling" acts.In this thesis, the first part is the introduction. Within this part we describe the realistic background and the theoretical background of this study and make a detailed illustration of the significances and the purposes of the research. The significances of this study are to discuss the impact the ownership structure on the major shareholders'"tunneling" acts from the perspective of the Reform of Non-tradable Shares, and to study the active role played by the flow shareholders to check and balance the major shareholders'"tunneling" acts directly cutting into the theme from the medium and small investors.The second part of this paper is a literature review of the domestic and international research, mainly launched and concluded from the following three aspects: the principal-agent theory, large shareholders "tunneling" acts, and the Reform of Non-tradable Shares. Predecessors'theory on the principal-agent mainly concentrated on the agent issue between shareholders and management, while this paper chooses another area of the principal-agent theory, namely, on the basis of the controlling shareholders and small shareholders as the agents. On the research of major shareholders'"tunneling" acts, academy mainly concentrated on the fields like the phenomena, the danger, the means and the constrained factors of the "tunneling" acts, yet this paper focuses mainly on another angle of the constraints: the research of the shareholder structure. The relevant literatures of the share reform are mostly the domestic literatures, mainly working over the supporting theory of share-trading reform, the paid price, the market reaction and the effect of share reforms, involving little empirical research of the share reforms. In this paper, data of the annual report is more directly used for the empirical study of the effects of the share reforms. The third part expounds theoretically the theme of this paper. First, we define the concept of Equity Game Groups, and make a detailed explanation. Later we analyze the behavioral characteristics of each stakeholder in the Game Group and put forward four assumptions by combining with other theories. Assumptions I: the control power of the major shareholders was inverted a "U"-type relationship with the"tunneling"acts. Assumptions II: the degree of the equity centralization and the tunnel acts was inverted "U"-type relationship. Assumption III: the balance of the equity and the "tunneling"acts were actively related. Assumptions IV: the checks and the balances of the flow shares had an outstanding negative correlation with the "tunneling"acts.We introduce the data selection and model-building in the fourth part. In the verification of the four assumptions raised in the former part, we use the data of the listed companies in Shanghai Stock Exchange in the years of 2005 and 2006 as samples, obtaining 797 sample companies by screening. To verify the effect, we make use of the data of the listed company who completed the share reform by the end of 2007, and select by screening the data of 783 company's shareholding structures and 766 companies'interest occupation. In this paper, the result of the designed variables is the indicators of other receivables, expressed by the proportion of other receivables accounting for the total assets; we use the shareholding proportion of the largest shareholder, the HF index, the sum of the shareholding proportion form the second to the tenth, the equity ratio of the top ten outstanding shares to measure the attributes of the structure such as the major shareholder's control, the concentration of shares, the stock checks and balances, and the checks and balances of tradable shares. Finally, we prove the issue through the six designed models according to our four assumptions before.The Part V of this paper is the empirical tests. In this section, we test the hypothesis by the application of descriptive statistics, correlation analysis and regression analysis, and get the following conclusions: major shareholders'control and the"tunneling"act were inverted a "U"-type relationship; the concentration shares and "tunneling" acts were inverted a "U"-type relationship; the checks and balances of shares positively correlates with "tunneling" acts; the checks and balances of flow shares and the"tunneling"act have a significant negative correlation. The conclusions of the Empirical Examination all support our assumptions. In addition, we also make a descriptive statistical analysis on the ownership structure of listed companies and the characteristics of the major shareholders'"tunnel acts" before and after the share reform, and get the following conclusions by testing: major shareholders'control power after share reform tends to become the relative control; shares'concentration tends to get a relative state; checks and balances of shares decreases; and the major shareholders'"tunneling" acts significantly weakened after the share reform.The part VI is the conclusion of this paper: the "tunneling" acts phenomenon of the major shareholders of the listed companies against the interests of the minority exists in China, and it has an outstanding connection with the equity structure of the listed companies such as large shareholders control, the degree of centralization in equity, checks and balances of the stock and the flow stock; the "tunnel acts" phenomenon has been resisted since the share reform; the management environment of China's listed companies has got an obvious improvement; and the interests of medium and small investors has received protects. In this section, we put forward the following political recommendations: to continue to reduce the state-controlled proportion of the shareholdings, to balance the interests among the outside shareholders, and to create a more favorable investment environment and management environment; to improve the right to speak in the shareholders game groups, small shareholders can take the methods of collecting the shareholders'rights to vote and voting"with their feet", so as to confront the interests occupation from the shareholders; and to continue to improve the internal and external monitoring of the major behaviors of the listed companies, in order to increase the sense of social responsibility of the actual controllers of the listed companies for the public.