Research On The Reasons And Economic Consequences Of Tunneling Behavior Of Major Shareholders Of ST ZhongZhu

In September 2005,with the complete reform of China’s non-tradable shares,the market has begun to enter a period of full flow,and the phenomenon of rigid control rights has been alleviated.However,this reform can not improve the weak status of minority shareholders,because the situation of restricting shareholders to "one dominant share" still exists,and the situation that major shareholders use their power to hollow out the company also occurs frequently.In addition,China’s current imperfect market supervision and management system leads to the low violation cost of major shareholders’ hollowing out,and all these factors create opportunities for their hollowing out.The favorable conditions of internal and external conditions also provide opportunities for the hollowing behavior of major shareholders.In order to achieve the goal of maximizing their own interests,major shareholders of the company make use of their equity and information advantages compared with minority shareholders to carry out the behavior of interest transmission.Similarly,the prosperity of the capital market depends on the government’s protection of minority shareholders.ST Zhongzhu is the first strand of Chinese eye science,the recent implementation of hollowed means profits from the affiliated party transactions typical of transportation company,it not only because of the punished by CSRC controls and speculative trading means,also gradually became the "* ST" because of poor financial company,to all the rights and interests of minority shareholders constitute the enormous damage,the enterprise value also down sharply.This paper takes ST Zhongzhu as an example to study the formation factors of major shareholders’ hollowing out behavior,and specifically analyzes what means major shareholders take to hollowing out behavior,and specifically analyzed the economic consequences caused by the major shareholder hollowing out,and put forward suggestions to protect the interests of small and medium shareholders.Different from the previous situation where most of the control rights of enterprises are controlled by a single enterprise,the control rights of ST Zhongzhu Pharmaceutical are relatively concentrated in the hands of two enterprises.The two major shareholders should have established a benign control relationship,but in order to promote the acquisition of One Medical,there are obvious interests between the controlling shareholder and the second largest shareholder.With the help of their own significant influence on enterprise management decisions,they frequently use connected transactions to transfer assets to enterprises,and there is the problem of major shareholder collusion.In addition,the actual controllers of the two major shareholders both serve as president and senior executive in Zhongzhu and their holding companies,and their abilities as decision-makers and execs cross each other,which creates conditions and opportunities for them to carry out related transaction benefit transmission activities.In this case,the big shareholder is facing financial difficulties,unreasonable equity structure,internal control failure,and violation of high yield and low cost is the major shareholders encroach on interests by internal and external conditions,the major shareholder in the implementation of hollowed behavior often through high premium correlation acquisition,take fund,implementing an illegal guarantee and so on a variety of ways,eventually lead to small and medium shareholders’ interests is a serious violation.In view of the forming factors and means of major shareholders’ hollowing out behavior,this paper gives countermeasures and opinions from two aspects of internal company management and external supervision.At the enterprise level,improving the internal control mechanism,optimizing the structure of checks and balances of major shareholders,giving play to the role of independent directors and the board of supervisors,and improving the investment decision-making process are important means for enterprises to curb the hollowing out behavior of major shareholders.In the aspect of external supervision of enterprises,the rights and interests of minority shareholders are effectively protected by increasing punishment,strengthening supervision,encouraging media supervision and continuing to improve the litigation protection mechanism of minority shareholders.