An Analysis Of Tunneling Of Listed Companies In The Private Placement

On January 31,2004,the state council put forward the problem of non-tradable shares,which has caused the attention of the capital market.Therefore,private placement began to gradually appear in the securities market.With its distribution features of simple process and no profit requirements,private placement is popular among listed companies.Compared with abroad,private placement in China starts late,many problems still exist in laws,regulations and regulatory.Large shareholders' tunneling behavior should not be ignored.Currently,many scholars conducted a study of the private placement and tunneling,including private placement at a discount,private placement announcement effect,tunneling in private placement,surplus management and so on.However,due to the start time of the private placement in our country is late,the related research of domestic private placement is incomplete.So,it needs to be further discussed.Through the combination of theoretical analysis and case studies,this paper explores if big shareholders have motivation of tunneling before the purchase,the reasons of tunneling,the methods and means which large shareholders have taken,and the impact and economic consequences of the tunneling.At last generalizing conclusions and offering some political suggestions.There are five parts in this paper,every part's basic ingredients are as follows.Chapter I is the introduction of the paper.This chapter first introduces the research background and significance,then reviews literature related to the private placement and tunneling,and concludes the revelation and shortcomings of the present study.There are research ideas and frameworks in the end of this part.Chapter II is the theoretical overview of the private placement and tunneling.This chapter first defines the concepts of private placement and tunneling,then analyses the reason and ways of tunneling theoretically.Finally,it expounds four theories involved in the paper,which are principal-agent theory,asymmetric information theory,big shareholder "tunneling" and "support" theory and tunneling effect theory.Chapter III is the implementation process of the private placement and tunneling.This chapter firstly introduces the case background,including company profile,and the plan and process of the private placement.Second,it analyzes the ways of tunneling in the private placement,and founds the ways including selecting the appropriate day of pricing benchmark setting for a lower price,reducing shares and holding cash after the private placement,the new shareholders loan to controlling shareholders after equity pledge,and the controlling shareholders inject high-priced assets.Chapter IV is mainly concentrated on the case analysis.This chapter analyzes the motivation and of tunneling of the controlling shareholders before the private placement and the reasons why the tunneling can form.Because of the tunneling,negative effects appear in the secondary market,and high-priced bad assets' injection has affected the long-term operational performance.Chapter V are conclusions and recommendations.The analysis finds that Shengtun mining has been tunneling through the private placement,which has brought the adverse economic consequences.Finally,suggestions are presented from the following five aspects to solve our country's problem of tunneling in the private placement,including improving the pricing mechanism of the private placement,strengthening issuance supervision and enhancing relevant information disclosure,regulating the behavior of asset appraisal value,establishing medium-small investors interest protection mechanism,and actively advocating institutional investors to participate in the private placement.Therefore,the contribution of this paper are the analysis of the motivation and ways of tunneling in the private placement of major shareholders and the presence of the ways of tunneling through case analysis.Furthermore,the paper also analyzes its economic consequences.It is possible to lay the foundation for future research,provide a reference for the regulation of the private placement in our country and for the investment behavior of medium-small investors,and let the general investors better identify the potential investment risk in the private placement.