A Research On Tunneling Of Major Shareholders On Listed Companies In China From The Perspective Of Asset Specificity

"Tunneling" reveals the contradiction between large shareholders and the other shareholders. The behavior has bad effects on both small shareholders and capital market. "Tunneling" behavior will reduce economic transparency, which leads accounting information to loss their trust, because the outside investors and users cannot evaluate the corporation by the financial reports. Since La Porta proposed the second kinds of agency problems, most researches about “tunneling” via two ways, the investor protection and ownership concentration. This paper attempts to explain the "tunneling" problem from a different perspective.When transferring of capital investment, in comparison with the non-control shareholders, the large shareholders is objectively required to pay much more cost for selection because of its huge investment. From the "Nash equilibrium shows Boxed Pigs Game", the major stockholder stemming from "opportunistic" and rational consideration, costs(including property, time, energy) carefully "care" and "supervision" the company’s daily operation, small shareholders must be chosen "hitchhike", below small shareholders significant liquidity for the like the big shareholders equity investment. In addition, although our country’s permit the controlling shareholder to transfer its shares after "reform of non tradable shares" to a large extent, China’s current "Securities Law" and the "company Law" or on the shareholding ratio exceeds a certain number(such as 5%) shareholders equity transfer proposed restrictions. And the transaction barrier is increasing along with the increase in the holding of shares. The government introduced these limits from transferring equity of large shareholders in terms of protecting small shareholders and creditors who dominating information. But it is that overburdened restrictions existing makes convertible ability or liquidity of listing Corporation shareholders’ invested assets’(compared to the small shareholders) more weakly.So, in the point of asset specificity, the shares of control shareholder of listing Corporation have strong asset specificity because they are objectively locked in. If the capital has stronger the assets specificity, the higher the rate of return was required. However, in most situations, the distribution of profits between shareholders is the same stock with the same pay, then, when the shareholders were locked in the "special investment" can share the profits or income only in accordance with its shareholding to computation, which is not enough for its cost. In this point, the control shareholder of the "EPS" is actually lower than the small shareholders’ "EPS"; the control shareholders’ risks of investment, exiting obstacles for transaction, is actually larger than non-control shareholders’. Just because of these reasons, large shareholders tend to "tunneling".This paper in the view of asset specificity, try to illustrate the phenomenon of "tunneling". The paper finally proved the following conclusion by method of logical reasoning and empirical test: Under the pattern of equal pay for equal shares, the stronger the specificity of shareholder equity investment is, the more serious the tunneling will be. On the contrary, the "tunneling" behaviors of the enterprise take place less and less when the asset specificity of large shareholders equity becomes weaker, because the shares can deal with or sell off easily. It is proved that "asset specificity" is one of the important reasons why the big shareholder "tunneling". Based on conclusions, the paper puts forward some advices to work out the problems of "tunneling ". The conclusions of this paper has especially important significance and guidance for the improvement of the governance structure and the management of listing Corporation system regulatory policy, especially to establish and optimize the related transactions involving large shareholders in regulatory policy.