Related Party Transactions With The Controlling Shareholder Of Embezzlement

When controlling shareholders carry on the connection transaction withthe company, they can frequently seek the individual benefit by harming theminority shareholder's benefits through its superiority status, thus how toprotect minority shareholder's benefits in connection transaction has become ahot topic in the current stock market.First, the paper analyzes the theories about the controlling shareholdersexpropriating minority shareholders through the connection transaction, thenanalyzes system background and the present situation of connected transactionin our country, last carries on empirical analyses about the connectiontransaction between listed companies and its the controlling shareholders. Thispaper examines a sample of 575 filings of connected transactions betweenlisted companies and their controlling shareholders during 2000-2004 inChina. At the same time, we take "Chunlan" as the example, analyzingconcrete expropriating behavior of asset sales, cash payments and equity salesbetween listed companies and its the controlling shareholders, and dialyseessence of phenomenon. Finally, according to the present situation andempirical result of connected transaction, the paper suggests several measuresto stop expropriating from related party transaction.The overall conclusion that this paper draws is as follows: connectiontransaction is one important way which controlling shareholder expropriate minority shareholders, and five kinds of connected transactions includingasset acquisitions, asset sales, equity acquisitions, cash payments and cashreceipts are easier to expropriate minority shareholders. Moreover,expropriation is significant "∩-style" related with shareholding percentage ofcontrolling shareholder, Independent directors have not obvious functions inreducing connected transaction made by controlling shareholder. Whencorporate's chairman of the board and chief executive are the same person,controlling shareholders are much easier to expropriate minority shareholders.And the CPA system can curb the largest controlling shareholder in fundimpropriation.