Research Of Tunneling In Private Placement

After the reform of non-tradable shares, the private placement gradually prevails in capital market for the simple review process, low disclosure requirements and low offering cost advantage and becomes the mainstream of equity refinancing in China. However, there are some deficiencies behind the aura of directional issuance. Under the background of our country’s special systems, private placement is alienated the tool of transferring of benefits by the controlling shareholders. The interests of minority shareholders have been invaded by the controlling shareholders and listed companies. Why does the private placement market become the tools of delivery interests? Whether the major shareholders has the motives before the private placement or not? What behaviors of delivering interest are included in the private placement? Why these behaviors can help the major shareholders achieve their purpose? In this paper, we will discuss the four issues mentioned above by theoretical discussion and case studies.The section of this paper is arranged as follows:The first chapter is Introduction. Firstly, it describes the background and significance of this study, and then introduces the research ideas and methods, the finally it delimits the concepts of the private placement and transfer benefits.The second chapter is literature review. Firstly, It reviewed the literatures on transfer benefits at home and abroad. And then It reviewed the literatures on the private placement at home and abroad. And finally, it reviewed the study of the private placement and transfer benefits.The third Chapter is the theory study of transfer benefits in the private placement. It describes the status quo of China’s private placement and then it analyzes the theory of transfer benefits including agency theory and asymmetric information theory. At last, it analyzes the common way of transfer benefits.The fourth chapter is case studies. This paper studies the WoLong Electric placement. Firstly, it introduces the background of the case, and then it analyzes the purposes of the controlling shareholder before the private placement, and finally it studies the behavior of transferring benefits during the private placement.The fifth chapter is conclusions, recommendations and outlook. The Paper suggests we can solve transfer benefits issues during private placement by the four aspects:Solving the separation of ownership under the pyramid structure; Improving the pricing system; Strengthening the assessment of asset quality injection; Improving the corporate governance.This paper has following Contributions:It analyze the motivation of controlling shareholders before the private placement from the separation of control rights and cash flow rights, the excessive related transactions of controlling shareholders and listed companies, the market performance of listed companies and the independent director system. It has laid a solid foundation for the analysis of the transfer benefits of controlling shareholders. Based on the analysis above, I approach some countermeasures. I hope that the paper can make some contributions to optimize the placement market, to protect the interests of minority shareholders, and promote the healthy development of the capital market.Scarcity:Firstly, about the private placement of Wolong Electric, whether the injected ATB company can bring synergy to the listed company or not, we should analyze the performance in the coming years.Secondly, because we cannot get the specific trade information between Wolong Electric and controlling shareholders, so we can not study further about the transfer benefits of private placement by analyzing the related party transactions.