Research On Impact Of The Controlling Shareholder's Stock Pledge On Tunneling

Tunneling refers to the controlling shareholders transfer the interests of public company secretly through occupying the fund or related party transaction.Major shareholders' tunneling will not only harm the interests of small shareholders,but also have damage to the listed company's operating capacity,profitability and corporate value.A series of laws and regulations have been introduced to regulate the behavior of large shareholders in our country,but the tunneling of major shareholders is covert and various.China's listed companies still are tunneled by the major shareholders commonly.At present,the financing channels which need to pledge stock is popular in our country.The current research at home and abroad all hold the view that the shareholder will tunnel the listed companies after they pledge stock.But with the China's law tighten,securities repeatedly punished and announced the major shareholders of listed companies which tunnel the fund resulting in financial distress.The illegal cost of major shareholder increase when the listed companies get into financial distress.The issue whether the major shareholder will continue to tunnel listing corporation when the listed companies get into financial distress needs us to explore.Therefore,this paper uses A-shares companies during 2010 to 2014 which listed in Shanghai Stock Exchange or Shenzhen Stock Exchange as sample to research.This paper based on the perspective of financial distress to study the impact of the pledge stock on tunneling behavior of major shareholder,which used the fund owned by big stockholders and related party transaction between big stockholders and listed companies to measure the tunneling of big stockholders.The main fame of the thesis is as follows:The first part is introduction.This part mainly explains the background of this paper which is about the situation of pledge and tunneling in our country,and the value of this research.It also introduces the research mentality and the content,proposes the research method and the innovation briefly.The second part is literature review.The part reviews the relevant literature about information tunneling and the pledge of stock.It shows different points about this topic and points out their contributions and shortcomings.The third part is the theoretical analysis and assumptions.This part provides the theory support:they are principal agent theory,pecking order theory,and transaction costs theory.Then the paper puts forward the research hypothesis based on relevant literature.The fourth part is research design.In this part,we construct an empirical model,explain sample data and list relevant variable in the model.The fifth part is empirical test.This part includes the descriptive statistics,correlation analysis and regression,to find out the impact of the pledge of stock on tunneling.This part also provides robustness test to perfect the results of the regression.The sixth part is the conclusion and the suggestions of the paper.In this part,we summarize the conclusions and put forward some suggestions,analyze the research limitations and point out the future improvement.The empirical results show that the listed companies are more likely to pledge stock when the companies get into financial distress.The big shareholders will increase the fund owned by them after the pledge of stock when the company isn't in financial distress.But they won't increase or decrease the fund owned by them after the pledge of stock when the company get into financial distress.The big shareholders won't increase or decrease related party transaction between listed companies and them after the pledge of stock when the company isn't in financial distress.But they will increase related party transaction between listed companies and them after the pledge of stock when the company gets into financial distress.This paper based on the perspective of financial distress to study the impact of the pledge stock on tunneling behavior of major shareholder,and compared the related party transaction and capital occupying,which are the innovation of this paper.The cost is lower but the risk of illegal is higher when the big shareholders tunnel the company through capital occupying.In contrast,the illegal risk is lower but the cost is higher when the big shareholders tunnel the company through related transition.The company will chose the capital occupying to tunnel the company which cost is lower when the company is not in the financial distress.The illegal cost is higher when the companies get into financial distress,the big shareholders will increase related party transaction which is more legal and hidden than capital occupying.Furthermore,this paper provides the theory of big shareholders' motivation that pledges the stock of the listed companies,and enriches the theory of consequences which is about the pledge of stock.It also enriches pecking order theory and the tunneling theory.The conclusions of this paper may help regulator hand the tunneling and recognize the hidden tunneling method which will protect the minority shareholders and perfect the system of pledge.They may also make securities market develop sustainably and healthy.