Is The Proportion Of Exchange In Mergers A Kind Of Expropriation?

Based on the study of the rationality of the proportion of exchange ofstocks and the alternative of cash selection option, this paper examines themotives behind the transfer of B (foreign) shares into A (local) shares andtheir economic consequences in the case where Zhejiang Electronic power co.ltd mergers the Zhejiang Southeast Electronic Power Company Limited.Combined with the environment of corporate governance and the corporategovernance situation now in the transformation stage of economics, weanalyzed the big shareholders’ tunneling behavior in the split-sharestructure reform. Using event study, we check weather the market supportsthe project of this merger or not.The evidence suggests that the proportion of exchange of stocks of thefirst B (foreign) shares into A (local) shares merger listing in integrity schemein China considers the various main factors influencing the merging party andthe merged party’s value, stock pricing fair&reasonable, effectivelyguaranteeing the merger and the mergee’s legitimate right and interests ofinvestors. On one hand, the merging party get the right of listing their stocks on the market by virtue of consolidation by merger, saving the high expensesin the process of initial public offer, solving the potential competition andrelated party transactions and improving the corporate governance structure.On the other hand, the merged party solve the problem of B (foreign) sharesreform with a smooth solution. The results of this study contribute to theways of innovation of B shares reform and perfecting the corporategovernance to protect the equities of small shareholders.