Research On Motivation And Economic Consequences Of Tunneling Of Cody Dairy’s Controlling Shareholders

Due to the concentrated ownership structure of listed companies in China,many companies have the largest shareholder that other shareholders cannot compete with,and the largest shareholder has the absolute right to speak of the company.Due to some special ownership structures,such as pyramidal ownership structure,the cash flow rights of major shareholders are not equal to their control rights.Major shareholders are likely to harm the interests of minority shareholders out of self-interest,so in China,the conflicts of interests between shareholders are serious.In addition,because at present our country has not set up perfect laws and regulations of the securities market system,the deficiency in the system of internal control of listed companies,small and medium-sized shareholders and between large shareholders and the pledge and there is information asymmetry between large shareholders,these factors to the controlling shareholders encroach on empty funds of listed company of the listed company to provide the opportunity,Controlling shareholders embezzle company assets through illegal guarantee,illegal related party transaction and other covert means,which cause very bad negative impact on listed companies and other stakeholders.In recent years,studies on the tunneling behavior of controlling shareholders have never been stopped,and most scholars have put forward preventive measures against specific behaviors.However,tunneling behavior is still not prohibited,so it is still necessary to study the tunneling behavior,especially the tunneling motivation,which is the most fundamental source of tunneling.This article selects the case company is emptied serious incidents happened in nearly two years of Cody dairy industry,with principal-agent theory,asymmetric information theory,control theory of private benefits,using the case method,as well as the combination of quantitative and qualitative analysis,comparative analysis and other research methods,analyzed the Cody dairy hollowed motivation and economic consequences,Some feasible suggestions are put forward to reduce the hollowing behavior of controlling shareholders.When focusing on the motivation of tunneling of controlling shareholders,this paper not only analyzes the characteristics of static two-right structure which is common in previous studies,but also analyzes the dynamic changes of financial status of controlling shareholders,so as to study the tunneling motivation of controlling shareholders to maximize control of self-interest.Compared with previous studies,It can analyze the hollowing motive of the controlling shareholder more comprehensively and thoroughly.Through the above research,the main findings are as follows: First,the controlling shareholders of Cody Dairy mainly hollowed out the company by means of non-operational appropriation of funds and illegal guarantee.Second,the controlling shareholders make the control rights and cash flow rights highly separated through the high proportion of equity pledge,which is the source of the motivation of the controlling shareholders and the basis of the occurrence of the tunneling.The controlling shareholder blindly expands,the production efficiency is not good,the capital turnover is in trouble,faces the huge capital demand,also provides the strong motive for its hollowing out;The income of the controlling shareholder is much higher than the cost of the tunneling.As a rational economic man,the controlling shareholder has the motivation of tunneling in order to maximize the private income of the control.Third,a dominant ownership structure,ownership concentration is high,the equity balance degree is low,the board members of the board of supervisors for chaos,the deficiency in the system of internal governance,external environment system is not perfect and external independent audit agency business quality is low,these are empty to controlling shareholder behavior smooth implementation provides favorable conditions.Fourth,the hollowing behavior of the controlling shareholders has brought significant negative impact on the listed companies,which has worsened the company’s business conditions,greatly reduced its solvency,profitability and development ability,frozen basic bank accounts and assets,filed lawsuits by multiple creditors,and greatly increased operating risks.Seriously damaged the interests of other shareholders,the sudden drop of stock price made investors suffer heavy losses,earnings per share and operating cash flow per share continued to decline,shareholders’ dividend income significantly reduced;At the same time,the stock price decline also brought serious losses to the pledge.In order to prevent the tunneling behavior of major shareholders,this paper puts forward the following suggestions: First,optimize the ownership structure of the company and disperse the control rights of controlling shareholders.Second,Ensure the independence of directors,supervisors and senior personnel,and strictly implement the internal control system.Third,improve the relevant laws and regulations on shareholders’ tunneling behavior,and increase the punishment for those who tunneling.Fourth,strengthen the training of external auditors to improve the quality of audit services.