Analysis Of Listed Companies Of The Unfair Related Party Transactions

With the development of securities markets and the expansion of business scale,it is inevitable for the listed companies pursuing the interests of related partytransactions. According to the report shows that in recent years, related partytransactions of the listed companies become more and more, more than70%listedcompanies do related party transactions with their related parties. In theory, the relatedparty transactions is a neutral concept, since fair related party transactions can reducetransaction costs, improving operational efficiency. However, unfair related partytransactions will manipulate the stock market and damage the interests of minorityshareholders and creditors seriously. Therefore, the regulation for unfair related partytransactions is increasingly becoming the focal point of concern.The case of Kelong is a typical case of unfair related party transactions of listedcompanies. From the perspective of the case of Kelong, the paper analyzes thereasons of the related party transactions and leads to four disadvantages of externalsupervision in the unfair related party transactions. The following chapters discuss thecurrent status and corresponding improvement measures of four disadvantages ofexternal supervision. The introduction discusses the background and significance forchoosing this subject as my paper. The paper is divided into five chapters. The firstchapter refers to the overview of the case of Kelong and its unfair related party transactions, leading to the shortcomings of external supervision on unfair relatedparty transactions among China’s listed companies. The second chapter exploresdeficiencies and the improvement of China’s information disclosure system.According to the case of Kelong, which presents the defects of information disclosuresystem, the paper raises some proposals to improve the information disclosure system,such as strengthening the authenticity of reviewing the contents of informationdisclosure, regulating and disclosing the pricing policy of related party transactions,detailing standards of information disclosure, increasing the contents of disclosureand improving limitation of information disclosure. The third chapter discusses thedefects and improvement of the regulatory regime for intermediaries. Based on thecase of Kelong, the paper points out those accounting firms, law firms and otherintermediaries do not play the role on supervising the unfair related party transactionsamong listed companies. Due to lacking independence and risk awareness, low ethicalstandards, weak brand awareness, adding to the fierce market competition andpressure, intermediaries are often reduced to a tool of the listed companies instead ofregulatory role to supervise the listed companies. According to the problems anddefects of intermediary institutions, this paper presents five measures to strengthenregulatory role of intermediaries, such as adjusting the appointment of intermediaries,adjusting the rewarding source of intermediaries, improving the moral standards ofthe intermediaries, enhancing the credit awareness of the intermediaries, andimproving external environment of intermediaries. The fourth chapter offers to thedefects and improvement of the Government’s regulatory regime. The case of Kelongshows insufficient supervision of the related party transactions of listed companies,such as inadequate regulatory legislation, lacking credibility, absenting regulatoryfunctions, and few approaches of regulatory. The paper proposes the following aspectsto strengthen the supervision, improving the governmental regulatory laws,strengthening the authority of the regulators, strengthening the regulatory functionsand improving the regulatory approach. The fifth chapter discusses the defects andimprovements of derived litigation system. Jurisdiction involved in the companies isnecessary to ensure external security for the companies, so it is an inevitable choice for strengthening judicial intervention in the trend of deregulation. The case ofKelong presents that the laws of derivative litigation is not concrete, especially in theobject and scope of derivative litigation. In judicial practice, it is difficult to carry outderivative litigation, therefore further refinement for derivative litigation is significant.Based on the defects of derivative litigation proposed above, this paper advancessome measures, such as specificing legal provisions, expanding the range of litigation,improving the constraint mechanism, improving the incentive mechanism, andestablishing reconciliation system of derivative litigation.