The Large Shareholders’ Behavior Of "Tunneling" Under The State Advances As The Private Sector Retreats Situation

The highly concentrated ownership has become a common phenomenon in most listed companies. In order to obtain the private benefits, the large shareholders infringe the rights of minority shareholders by "Tunneling" behavior. The agent problem II has become a major problem which is confused many listed companies.At present, domestic and foreign scholars have done a lot of studies about the listed companies "tunneling" behavior around the causes、effects and influence factors. But from the literature review, the author finds that most scholars do researches about controlling shareholders’ "Tunneling" behavior from the corporate governance internal mechanism perspective instead of the changes of the external environment perspective. Berle and Means(1932) proposed, the effective competition of the product market had a positive effect on listed companies’ corporate governance. After 2008, "the state advances as the private sector retreats" phenomena emerged in China, which provides a natural laboratory for the study of this paper. Most of the Chinese listed companies are the products of state-owned enterprises’ reform, which have unusual relationship with their related party under the control of the parent companies. In this special background, the condition for the "tunneling" behavior which do harm to both the minority shareholders and the companies has been created. The degree of competition in the market has been greatly weakened by "the state advances as the private sector retreats" phenomenon, and the normal operation of the market mechanism has been destroyed. The problems of corporate governance appeared during the time, the "tunneling" behavior by the related party transactions from the major shareholders that the paper discusses is just one side of the corporate governance.This paper collects controlling shareholder stake, the size of "Tunneling", total assets, asset-liability ratio and other related data of Shanghai and Shenzhen A-share listed companies from 2004 and 2013, and uses the method of empirical analysis method to research the relationship between the control major shareholders and the size of "Tunneling". There are two models in this paper. First this paper does the descriptive statistical analysis with the article relevant data, and then does the single variable analysis and correlation analysis between the state-owned companies shareholders and the size of “Tunneling”. At last does the linear regression for further test the relations between the two sides.The results of this paper show that the "tunneling" phenomenon which Chinese state-owned enterprises exist is more serious after the “the state advances as the private sector retreats”, while the unstate-owned enterprises behavior the opposite way. This is because the absence of owners and lack of supervision of large shareholders in state-owned listed companies, and also because competition in the market is less effective. This paper did the empirical analysis on the relationship between the listed company’s behavior of "tunneling" and the shareholding ratio bases on the reasons mentioned. The results show that "tunneling" behavior of listing Corporation exists no matter what stake the large shareholders have. This paper also finds that the restriction of the second large shareholders is different based on the stake that the large shareholders have. The empirical results of this paper provide a reference to the current mixed ownership and the governance of Modern Corporation.