Analysis On Management Of Tunneling By Major Stockholders In M Company

Sole majority shareholder is a ubiquitous phenomenon in Chinese listed companies.For the agent problem in most listed companies,the first type has been replaced by the second type of agent problem between major stockholders and minority shareholders.Based on power of corporate control,it is rather difficult to prevent major stockholders to gain personal benefits and earnings through tunneling,which is also becoming complicated and hidden.Tunneling not only encroaches upon rights and interests of minority stockholders.Moreover,it also has negative impact on sustainable development of companies and monetary market.At present,it is an urgent task for supervision departments to handle the tunneling of major stockholders.Under this circumstance,on the basis of agency theory,information asymmetry theory and PBC theory,this paper studies the tunneling by major stockholders in M company.It shows that major stockholders exploit corporate funds through following ways:foreign investment,occupation of operational funds and illegal guarantee.Then,the paper discusses the reasons why major stockholders successfully conduct tunneling.Firstly,due to high concentration of corporate stock rights,minority stockholders are not able to monitor the behaviors of the first majority shareholders.Secondly,ineffective mechanism of internal governance.Major stockholders dominate the board of directors and board of supervisors.Thirdly,lack of exterior governance and supervision mechanism for listed companies.Related parties are hard to be confirmed.Defects are also found in the mechanism of information disclosure.Moreover,third-party intermediary organs fail to perform their duties,severely punish unlawful acts and effectively protect interests and rights of minority shareholders.Next,the paper analyzes consequences of tunneling by major stockholders.Corporate business performances market values of listed companies have declining sharply.Rights and interests of minority stockholders are also severely encroached.Lastly,according to the reasons and consequences of tunneling by major stockholders in M company,countermeasures against tunneling of major stockholders are proposed from three aspects:ownership structure,internal governance and external governance.Institutional investors need to optimize ownership structures.Improvement of internal governance gives full play to supervisory role of board of supervisors and directors.Committee of regulating related party transactions needs to optimize the internal control system,enhance laws and regulations,strengthen supervision and punishment,so as to conduct better exterior governance.