Analysis On The Legitimacy Of Listed Corporations’ Connected Transactions

This paper talks about the legitimacy of listed corporations’connected transactions. It can be divided into three parts: Introduction,Body and Conclusion. The body of the paper is divided into six chaptersand covers a word-count of37,000.First and foremost, the background and the research reality of thetopic as well as the research methods and the layout of the paper willbe described in the Introduction. It will also mention the innovativepoints and limitation within this research.The first chapter uses an interesting case to reveal some basic lawissues about connected transactions by analyzing corporation financiallaw theories. These issues focus on the area of information disclosure,rules of voting, and interest-conflicts.The second chapter mainly talks about the concept of related party.Firstly, this chapter summarizes PRC law and regulations which regulatesthis problem, and makes some comments as well. Secondly, we draw theconclusion that there is no need to fix a boundary of what the "relatedparty" is. What law shall do is to provide some standards to judge whethersome persons or legal persons are related parties. The third chapter talks about the forms of connected transactions.The first and second sections summaries the types of connectedtransactions under PRC accounting law and security law, and compare thatto some familiar concepts. The third and fourth sections talks about thecircumstances of China listed corporations’ connected transaction, andgive some examples to demonstrate clearly.The fourth chapter talks about the legitimacy of connectedtransactions and why the law shall regulate them. Connected transactionsmay bring benefit for the corporations without hurting others’ interests.Moreover, some kinds of connected transaction are written to happen. Onthe other hand, there two reasons that connected transactions shall beregulated. First, it may violate stakeholders’ rights by transfer profitsillegally. Second, long-time connected transactions may cause the firmlose independence and the ability to make profits.The fifth chapter talks about how PRC law regulates listedcorporations’ connected transactions. Firstly, the informationdisclosure policy alone can not guarantee the fairness of connectedtransactions. Secondly, the problem of asymmetric information is not theonly reason that leads to the agency costs between major shareholder andminors. Third, it’s not a good idea to give the minors a right to denythe connected transactions beyond its normal voting right.The sixth chapter talks about the motivations of unfair connectedtransactions. The chapter analyses how listed corporations transferprofits or whitewash the financial statements. What is more, we explainthe reason in the aspect of securities regulations.Finally, we summarize the whole paper in the conclusion part.