Tunneling Of Brother Companies Based On Large Shareholders

Large shareholder’s expropriation behavior is widespread around the world atpresent. The private benefit of control caused by concentration ownership is theimportant motivation for the tunneling of large shareholder. As you know, the tunnelingbetween large shareholders and listed companies has resulted in huge losses of smallinvestors. The study of tunneling mainly has focused on the tunneling of list companiesby large shareholders in domestic or foreign. They concentrated on the tunneling ofsubsidiary company by parent company, but they left out the tunneling between brothercompanies. Because the SFC published the strict regulation of capital occupying by largeshareholder, it’s necessary to try starting the research on brother companies, particularlyconsidering the special IPO background of China. The article aims to find out theevidence of tunneling of brother companies by comparison of the capital occupation ofparent-subsidiary and brother companies. What’s more, we make a research on thefactors of the tunneling of brother companies.This paper uses the multiple regression analysis method to reveal the existenceof tunneling between brother companies. Then it analyzes the share of largestshareholders in China through the relevant data of A-share listed companies from2007to2011. Finally, on the basis of the above study, we try to test and explain the influencingfactors of tunneling between brother companies. This thesis finds that when the stake oflargest shareholder is higher, tunneling between brother companies is more serious. If alisted company is state-owned enterprises, tunneling between brother companies is moreserious. The larger the number of brother companies, the more serious the tunnelingbetween brother companies. This paper suggests it’s necessary to improve marketsupervision to protect minority shareholders. We should pay seriously attention to thehistory problem of state-owned enterprises for easing their “burden”. The last but not theleast, our government should implement the demand of value-added of state-ownedassets to reduce agency costs between funders and managers.