Empirical Study Of The Support Behavior Of The Large Shareholders Of Listed Companies

The theory of tunneling and propping is a hot topic arising from corporate finance. Most scholars have achieved fruitful and clear evidences of tunneling by making full use of empirical research about tunneling through related party transactions. However, studies on the value-added activities of propping are rarely conducted. The paper focuses on propping of the largest shareholder, studies on the factors affecting the decision of propping, examines the market response of propping activities using event study method. It takes advantage of the game model for control rights contest, advances and examines the hypotheses on the relationships among the degree of propping, largest shareholders, concentration and leverage. By conducting regressions, we find that the degree of propping is positively correlated with largest shareholders and concentration, while negatively correlated with leverage. When examining the market response of propping activities, we divide the firms into several groups, in which varied propping approaches and the nature of propping firms are concerned. After examining the short-term market response of propping activities, we draw the conclusions that propping activities are significant, that different propping methods have varied market response, and that propping is more effective in state-owned stockholders than in non-state-owned stockholders. Besides, we measure control rights benefits from game model, and find the reasons why control rights benefits are relatively low. Moreover, we select some listed firms to conduct case study. Finally, we make valuable suggestions which cater to the needs of outside shareholders and regulators, in the hope of triggering competition for control over listed firms, raising ST firms' value-added ability and in the end benefiting ordinary outside shareholders.