Directional Issuance To Shareholders Interests In Transportation Probiem

After the reform of non-tradable shares in2005, private equity placement gradually becomes amajor refinancing way in China’s capital market for its unique issue method and low issue cost. As a newrefinancing way, private equity placement may lead to two counter consequences: it can bring collaborativebenefit which means a win-win situation between major shareholders and minority shareholders; or it canbring tunneling as well, which means major shareholders encroaching minority shareholders. Comparedwith developed countries, Chinese capital market still has several problems in this area, such as theimperfect legal system, uncompleted theory foundation and so on, which make the problem of tunnelingmore and more serious while the win-win situation is far from being realized. The major shareholders maygrab interest from minority shareholders’ who do not participate in private equity placement throughseveral measures, such as discounted add-issuance, injection of non-performing assets, cash dividend afterprivate equity placement and so on.This paper takes A Company as study object and tries to make it clear that whether this private equityplacement brings collaborative benefit or tunneling, and further analyze its causes. In this paper, fouraspects are concentrated, which are trade suspension time before private equity placement, the sum ofinjected asset quality, earning management before private equity placement and Audit quality. Moreover,considerable financial data are adopted to support this research conclusions as well as experience in ACompany annual audit.It finds that this private equity placement did not achieve its original purpose in the placement plan.All the signs, like stock price fell sharply before the trade suspension, assets are inflated in assessment,indicate the fact: tunneling is realized and minority shareholders’ benefit is encroached.Finally, some advice are put forward in this paper according to research conclusions, which are aimedto help complete related rules and regulation.