On The Economic Consequence Of The Related Party Transactions Of Family-controlled Listed Companies

In recent years, the focus of governance research have changed from the separation of control right and ownership right, which results in the first agency problem of the conflict of the shareholders and management, to the that of the control right and cash flow right, which leads to the second agency problem of the controlling shareholder exploite the interests of the small shareholders, that is so called "tunneling" effect. The change of focus indicates that the concentrate ownership structure and the high separation of control and cash flow right are widespread throughout the world, in addition, the lack of relevant law protection for the small shareholder, the creditor and other stakeholders, make the controlling shareholders have great incentives to maximize their own interests at the cost of tunneling interests of small shareholders, especially in emerging developing countries with rapid economic development and backward legal systems, like China, India, etc, while the related party transactions(for short, RPT) is the main way of tunneling. With the rapid development of the technology, the abrupt changes of market environment, the deficiency of external legal mechanism, family-controlled listed companies increase and expand, especially in the group engaging in many industries, the related operation process, bad external operation environment, so the RPT became very frequent in family-controlled listed companies. However, as we all know, the RPT is a double-edged sword, which can produce two opposite effects:enhancing efficiency effect, tunneling, and elective propping effect. On the one hand, the members can take good advantage of internal capital market and element market to decrease transactions cost, the uncertainty of the market transaction ect, on the other hand, the internal market give the opportunity of the controlling shareholder tunnel resources out of the companies and exploite the interests of the small shareholders through RPT unconsciously, they exploite the interests of the small shareholders. In addition, in order to get more income, under some circumstances when the list company need to meet certain profitability indicators achieve some earnings management target, for example, a rights issue right, removing the risk warning cap, avoiding loss, the controlling shareholder will prop up firms for the interest in the future, which is "Propping behavior". Therefore, the economic consequence produced by the RPT is apparently important.For this reason, this paper do research on family-controlled listed Companies in China stock market in2009-2012through the way of qualitative and quantitative analysis, normative analysis and empirical research to study the microcosmic economic consequence of the RPT in family-controlled listed companies. This paper do research on which types and which party of the RPT induce a positive impact or negative influence on the family-controlled listed companies in detail through the empirical research results under different circumstances, then identity the key party transaction party, which can provides the empirical basis for the relative regulators’work.Around this research subject, This paper is divided into six parts:Chapter1is the introduction, which mainly introduces the research background and significance, literature review and its criticism, as well as the main research contents and methods; Chapter2is the basis of the research on family-controlled listed companies’RPT, first of all, define the family controlled listed companies, the elective Propping and economic consequences of the RPT, Secondly, the paper expounds the theoretical basis of RPT’economic consequences, which lay solid theoretical foundation for assumptions research backward; Chapter3is the research design, which define the types of the RPT on the basis of the RPT character’ analysis, and then put forward relative assumptions and construct research model; Chapter4is the research results and analysis, which consist of descriptive statistics, regression result, and robustness testing; Chapter5is research conclusion and prospect, this part puts forward relative policy advices on the basis of research conclusions, points out the innovation and shortcomings of this study, direction of future relative research.