Case Analysis On Substantial Shareholder's Tunneling Behavior In Related Party Transaction Of Chunlan Corporation

Related party transaction is prevalent in market economy.Proper connected transaction can effectively reduce the operating costs of listed companies and improve their economic benefits.However,improper connected transaction is likely to be used by shareholders to implement tunneling behavior,which not only disrupts normal market economic order and seriously dampens investors' investment confidence,but also damages the interests of investors,creditors and small and medium-sized shareholders,and hinders the healthy and stable development of Chinese capital market.Tunneling behaviors are widespread in improper connected transactions of listed companies in the capital market development in China.How to regulate the improper connected transactions,prevent the controlling shareholders of listed companies from implementing tunneling behavior to empty the listed companies,and maintain the fairness and order of capital market transactions has become an issue worthy of attention and research.In order to intuitively understand the influence of shareholders' tunneling behaviors in related party transactions and provide some ideas for preventing and reducing tunneling behaviors,based on the subject of tunneling behaviors in connected transaction,this paper analyzes the tunneling behavior of major shareholders in connected transactions of Chunlan Corporation.By analyzing a series of problems about the tunneling behaviors of major shareholders in improper connected transaction of Chunlan Corporation through a case,the countermeasures are forward to solve the problems.The previous research on improper connected transaction focused on the protection of listed companies,based on the case analysis of improper connected transaction of Chunlan Corporation,this paper focuses on the tunneling behaviors and the corresponding consequence and harm in improper connected transactions.The causes and problems of connected transaction in Chunlan Corporation are explored to further discuss how to effectively avoid the tunneling behaviors of major shareholders.This paper is structured into five parts: introduction,theoretical overview,case introduction,analysis and conclusion.Part 1 introduces the research background and significance of this paper,literature review,research methods and contents.In Part 2,the definition,method and classification of connected transaction,the definition,causes and influence of tunneling behavior of major shareholders,and the way to conduct tunneling behaviors are presented.Part 3 introduces Chunlan Corporation and Chunlan Group,and analyzes connected parties,connected transactions and tunneling behaviors in connected transactions.Chunlan Corporation,as a subsidiary of Chunlan Croup,has a large number of related parties.A variety of connected transactions occupy a large proportion of its daily business activities.The Group's demand for capital prompts it to conduct tunneling behaviors.According to the connected transaction situation of Chunlan Corporation,connected purchase and sales,especially connected purchase,occupied a large proportion in daily business activities.However,Chunlan Corporation does not benefit from its connected transactions.Connected parties occupy Chunlan Corporation a huge amount of capital every year,resulting in a large number of bad debts.In addition,Chunlan Corporation sells asset and transfers equity for cash,which demonstrates the tunneling behaviors of its major shareholders in connected transactions.Part 4 analyzes the adverse consequences caused by tunneling behaviors implemented by Chunlan Corporation in connected transactions.The analysis results show that the tunneling behaviors in connected transactions have seriously affected the stable and health development of Chunlan Corporation,resulted in the low current asset ratio and the extremely high non-performing asset rate and reduced the asset quality,which triggered the delisting crisis of Chunlan Corporation.Meanwhile,tunneling behaviors of major shareholders reduce the profitability of Chunlan Corporation.Since revocation of ST in 2012,the net profit of Chunlan Corporation has been fluctuating on the margin of loss,and the profitability index is far lower than the industry average.In addition to Chunlan Corporation itself,the right and interest of minority shareholders have also been infringed.Low profitability and sustained losses make it difficult for investors to earn returns,and minority shareholders can hardly obtain cash dividend.Finally,based on the above analysis of the tunneling behaviors of major shareholders in the connected transactions of Chunlan Corporation,Part 5 summarizes the experience of Chunlan Corporation and the enlightenment for listed companies to prevent and reduce tunneling behaviors of major shareholders in related party transactions.In the case of Chunlan Corporation,it has become the service providers of group demand due to its over-reliance on major shareholders and connected parties.Major shareholders carry out tunneling behaviors through related party transactions.Tunneling behaviors have negative impact on the sustainable development,profitability and minority shareholders of Chunlan Corporation.Therefore,listed companies should not only actively prevent tunneling behaviors of major shareholders in related party transactions and establish relevant examination and approval,review and accountability system,but also enhance their independence and ability to operate autonomously,avoid excessive dependence on connected parties and optimize equity structure.Moreover,in order to control the tunnel behaviors of large shareholders,the government needs to standardize and perfect the relevant laws and regulations,and minority shareholders shall enhance their awareness of safeguarding their rights and enhance their relevant knowledge.