A Study On Misappropriating Behavior Of Controlling Shareholder Of China’s Listed Companies In Condition Of Full Circulation

Since the reforms of split share structure in2005, three-quarter of the restricted stocks formed by share reform have lifted a ban into circulation. With the opening of full circulation, large shareholders of the listed companies would change their behavior pattern accordingly. After the share reform, large shareholders can make profit more complicatedly through more channels instead of unitary tunneling. It would be not worth the candle if the large shareholders continue tunneling the listed companies, so they will comprehensively use both tunneling and propping through several stages to get the most profit.Enlightened by some tunneling cost models, optimal reduction model and entire policy models, this paper established a three-stage-option model. By means of a reverse analysis of the large shareholders’ behavior, we got some factors which can influence the controlling shareholders’tunneling and propping reaction.Aiming at all the non-financial listed companies of Shanghai and Shenzhen Stock Exchange which had completed the reform except those had a title as "ST" between January2005and March2012, we got1109samples. Through analyzing the contribution of PB ratio, initial shareholding, private benefits of control and others to the reducing proportion or propping ratio from empirical regression, we found that:1) controlling shareholders’ optimal reducing proportion had positive correlation with PB ratio, right before the reduction, legal environment and initial shareholding while negatively correlated with SQ(the separation quantum of ultimate cash flow rights and ultimate control rights), ownership concentration and asset injection ratio;2) Controlling shareholders’ optimal propping ratio positively correlated with the increasing share proportion formed by their asset injection, but its correlation with the PB ratio and initial shareholding was not clear since the condition of market strong-efficiency could not be fulfilled.Lastly, on the found of those conclusions of this study, several advices about strengthening corporation governance, improving information disclosure and making innovations in supervision system were proposed to standardize large shareholders’ behavior and protect medium and small investors’ rights and interests.