Tunneling Of The Controlling Shareholders From M&A

With a history of over one hundred years,Mergers and Acquisitions(M&A s)has become one of the most imperative parts in the growth and development history of many companies,also an eternal research subject in the academic world.Currently,the researches of domestic and abroad scholars have focused on the agency theory,efficiency theory and the subsequent tunneling theory etc,to analyze the benefits and costs,influent factors and economic consequences of M&As.Based on the tunneling theory,this text considers the specific background of China and the situation of our securities market,investigate the motivation and manner of tunneling and the influence on the accounting performance before and after the M&A s.The Tunneling M&A in this text refers to a specific kind of M&A in which the controlling shareholders aim at acquiring controlling benefits during merger activity and would continue to expropriate the interests of the listed company afterward.These kinds of M&A are often malicious and detrimental to the interests of other shareholders.The unique system background,imperfect rule of law,weakening intermediary environment,irrational stock right deployment,invalid corporation administration of China could be the breeding ground of the M&A s.This article is divided into a total of six chapters,the brief content of each chapter are as follows.The first chapter is Introduction.This chapter point out the background and significance of the research.The second chapter is literature review.This chapter can be divided into two parts.The first part is to study the motivation of tunneling mergers.The other part is to find out the relationship between the tunneling behavior of the controlling shareholder in M&A and the company's performance.The third chapter studies the methods controlling shareholder use to tunneling in M&A.This chapter,the first two parts describes the way for controlling shareholders to tunneling the listed companies in mergers and acquisitions.Listed companies acquire equity with high price or sale its assets with low price to its controlling shareholders and related parties.The tunneling behaviors after M&A include that controlling shareholders directly take up capital of listed companies,the controlling shareholder earnings manage the listed companies and other agent behaviors.The third part of this chapter describes the case of the tunneling behaviors of "ChengGong group" in acquiring two listed companies.We analyzed the tunneling behaviors of shareholder in detail.The fourth chapter,we did empirical research on tunneling behaviors in M&A which is the core part of this paper.This chapter We study the how the following five factors include external environment factor,ownership structure factor,corporate governance factor,financial condition factor and transaction factor affect the tunneling behavior of controlling shareholder.The fifth Chapter is to indicate the tunneling behavior of controlling in the M&A and Corporate Performance Relationship.This chapter is still a core part of the paper,that part is the verification of the hypothesis of this study and the literature review in chapter two.This chapter will use accounting performance indicators to make a comparative analysis of two types of samples(tunneling type and tunneling type)the year mergers and acquisitions occurs and two years before and after the M&A.We use five financial indicators(profitability indicators Al,debt solvency indicators A2,asset management capacity indicators A3,risk management capacity indicators A4,growth and development capacity indicators A5)come from factor analysis to represent the accounting performance of each accounting period of the listed companies,as to study the relationship between the tunneling behavior in M&A and corporate performance.The sixth chapter is the conclusion of 'this study and inspiration.We make the main conclusions of the empiric,al research and give some suggestions.we come the final conclusion as followed:(1)The major motivation of controlling shareholder to tunneling through merger is,first of all,the external legal factor.When the minority shareholders and company's related interest parts are lack of regulations and laws law protection,the controlling shareholder can easily expropriate profits resources of the listed company through merger activities.The second factor is the institution.With the completion of reform of non-tradable shares,controlling shareholders and listed companies can achieve the convergence of interest which would reduce the possibility of the tunneling through merger.The third factor is outside supervisory.For the companies with the lower corporation asset-liability ratio,the constraints of external creditors are weak,and the tunneling behavior of the controlling shareholder is lack of effective supervision in this condition.And the equity structure is the fourth factor.The test results show that there is an inverted U-shaped relationship between the cont:rolling shareholder of listed companies and the tunneling behavior.(2)The research also found that the tunneling behavior of the controlling shareholder in M&A shall affect the company's performance.In order to avoid regulatory attention and maximize tunneling in the future,the largest shareholder would do earnings management of the accounting performance before M&A.The image of listed company is packaged into high-speed growing and good performing.This veil of profitable listed companies which exist tunneling will quickly be peeled off after M&A.The profitable capacity,debt repayment capacity and growth capacity will be significantly lower than the pre-merger levels two years after the merger.