An Analysis On New Tunneling Behaviors By Controlling Shareholders In The Background Of Post-Non-Tradable Share Period

For a long time,tunneling behaviors by controlling shareholders in Chinese capital market have been existed stubbornly.The cases in which the controlling shareholders infringe the interests of listed companies or minority shareholders by occupying the capital of listed companies and guaranteeing illegally under the title of listed companies in some relevant transactions are great in number,which have a negative impact on the healthy development of Chinese capital market.In April of 2005,the revolution of equity division was started.On the one hand,it has solved the phenomenon of equity division while on the other hand,while promoting equity division,regulatory institutions have proposed various laws and regulations in an active manner to improve the management of listed companies and enhance the protection towards minority investors.At the end of 2006,after the equity division has been basically achieved,the tunneling behaviors of controlling shareholders have reduced to a large extent.After equity division,do tunneling behaviors of the controlling shareholders still exist? If they do,in what form do they exist? With these questions in mind,after collecting,analyzing and reviewing the literatures at home and abroad and by combining the case study of *ST Tong Pu,this paper gives theoretical study and case study on the new tunneling behaviors conducted by controlling shareholders after the equity division,including “share underweight”,“equity private placement” and comprehensive arbitrage model of “private placement after underweight” and discusses the tunneling behaviors of controlling shareholders involved in it.The fundamental reasons behind the tunneling behaviors of controlling shareholders are also analyzed and finally some policy suggestions are provided.This paper includes five chapters and the main content of each chapter is as following:The first chapter is the introduction,which mainly introduces the research background and research significance of the paper.The literatures in China and abroad on tunneling behaviors of controlling shareholders are analyzed and finally the research thinking and methods are illustrated.The second chapter is an overview of tunneling behaviors of controlling shareholders as well as their theoretical basis.This chapter first introduces some basic concepts used in this paper,discusses the tunneling behaviors of controlling shareholders before and after the equity division reform respectively and then compares the changes of tunneling behaviors happened after equity division reform.Finally,the theoretical basis of the tunneling behaviors of controlling shareholders is introduced.The third chapter analyzes the ways and reasons of the new tunneling behaviors after the equity division.This chapter gives a theoretical analysis of the new tunneling behaviors of controlling shareholders after equity division reform,including share underweight,equity private placement and stock ownership incentive.Innovatively,the comprehensive arbitrage model of “private placement after underweight” is also illustrated deeply.At the same time,the internal and external reasons behind the tunneling behaviors of controlling shareholders after equity division reform are also analyzed.The fourth chapter is a case study on the tunneling behaviors of controlling shareholders in *ST Tong Pu.Firstly,this chapter introduces the background information of the case;secondly,based on the theoretical basis introduced in the above part,this chapter analyzes the tunneling process of *ST Tong Pu by its controlling shareholder New Hualian in terms of the time selection,information disclosure behaviors and share price manipulation of share underweight and equity private placement.It also discusses the comprehensive arbitrage model of “private placement after underweight” adopted by New Hualian;thirdly,by analyzing the financial indicator data of *ST Tong Pu,the economic result as well as the interest infringement on minority shareholders brought by the tunneling behaviors of New Hualian is illustrated;lastly,the specific reasons behind the tunneling behavior of New Hualian on *ST Tong Pu are summarized.The fifth chapter is the policy suggestions on preventing tunneling behaviors of controlling shareholders after equity division.The suggestions are proposed from various aspects,such as developing diversified investors,normalizing the information disclosure of listed companies,creating the governance mechanism of the companies,perfecting the regulation environment and protecting minority investors so as to provide references on the prevention of tunneling behaviors of controlling shareholders.The main conclusions in this research include:Firstly,tunneling behaviors of controlling shareholders still exist after equity division reform because the dominant place of controlling shareholder remains unchanged.The controlling shareholders tend to make use of their advantages in terms of information and controlling power to obtain additional profits and to infringe the interests of minority investors.Secondly,the ways and methods of tunneling behaviors of controlling shareholders have changed after equity division.They mainly form a riskless arbitrage model by conducting share underweight and low price equity private placement in secondary market.Thirdly,the new tunneling methods of controlling shareholders are more disguised.The existing internal governance mechanisms of the companies and the external regulatory systems have no effective binding effect on the new tunneling behaviors of controlling shareholders.The innovations and limitations of this paper:Firstly,this paper analyzes innovatively the new arbitrage model of “private equity after underweight” of controlling shareholders and illustrates that the tunneling behaviors of controlling shareholders are not limited to certain ways but are conducted through various ways comprehensively.A comprehensive arbitrage model was formed after equity division to obtain additional interests and to infringe the interests of minority investors.Secondly,combining with case study,this paper illustrates the serious economic results brought by the tunneling behaviors of controlling shareholders after equity division reform by analyzing the financial indicator data of *ST Tong Pu.It is hoped that the analysis of this paper will provide some references and suggestions to relevant regulatory institutions and minority shareholders and encourage the protection of the interests of minority investor.