Empirical Study Of Inhibited Effects Of The Equity Incentive System On The Tunneling Problem Of Substantial Shareholders

At present, most listed company is charged by substantial shareholders in our public market.And the tunneling problem will be the main problems of listed companies in the lasted years. The substantial shareholders hollowed out the listed companies’ profits by many ways from Kelon Electrical to Xiancheng Mining, large shareholders transfer out the listing Corporation’s assets and cash flow through a number of related transactions. Though the equity incentive system was introduced into our country just for a short period, the effects of equity incentive system in solving agency problem has been confirmed. But there are some doubts about the effect of the equity incentive system in alleviate the interest inflicts between the substantial shareholders and the minority shareholders. The purpose of this article is to confirming that the equity incentive system have some inhibitory effects on the agency problem between the substantial shareholders and the minority shareholders, we did an empirical analysis. Now the tunneling problem of large shareholders have become an important factors that influence the long-term healthy development of the capital market in China. If the tunneling problem was inhibited, then the benefits of minority shareholders will be protected and the confidence of small shareholders on the capital markets will also be promoted. So the work of the empirical analysis between the equity incentive system and tunneling problem of substantial shareholders becomes meaningful.The main content of this article is to confirming the relationship between equity incentive system and tunneling action. In the first part we have a clear understanding of the reason that led to the tunneling problem and the effects of the equity incentive system in solving agency problem by reading the ancient texts and documents. Besides, we also have a briefly analysis on the tunneling method and the problem of the equity incentive system. And we also build a model to confirm the effects of the equity incentive system in solving tunneling problem.At last, we get a conclusion by empirical analysis that the equity incentive system have a significant inhibitory effects on the tunneling action of substantial shareholders. And this effects is robust that not influenced by the way of the equity incentive system. Or said differently, the company that take the equity incentive system have lower possibility of tunneling problem.