A Study Of The Relationship Between Corporate Governance And M&A Tunneling

Investors in China can’t be protected well because of our irregular capital market system, which formed in a special background. Single-large shareholders exist commonly both in state-owned firm and family business. Controlling shareholders dominate corporate, ignoring relevant laws and regulations. On this condition, tunneling behavior frequently occurred within the company, which not only disorder the market, but also restrain out economy development.With the development of our capital market, relevant laws had been improved largely, tunneling behaviors don’t as serious as before whilst still exit in capital market. It emerged as a more concealed form----tunneling acquisition. The paper demonstrate manner of tunneling acquisition through theoretical and empirical analysis, discuss how corporate governance affect tunneling acquisition, thus finding the possible influence factors of it.The article is based on M&A companies in Shanghai and Shenzhen stock market from2007to2010, make a study on the influence factors of tunneling acquisitions by the way of normative analysis, descriptive statistic, correlation analysis and regression analysis et al. The results indicate that the major approach commonly used to tunneling acquisition is asset acquisition, equity transfer, asset stripping and asset replacement. Controlling shareholders make profits for themselves in related party transactions by selling at high price and buying at low price. The higher Z index, the easier to incur tunneling acquisitions. Tunneling acquisitions occur more easily in state-owned firms compared with private companies. Only completing relevant laws and strengthen monitor in stock market can effectively and radically constrain tunneling acquisitions, which are benefit for sustainable development in economy.