The Tunneling Behavior Of Ultimate Shareholers In The Related Party Transactions

The problem of tunneling is an important research area of corporate governance. The nature of this issue is the conflict of interests between controlling shareholders and minor shareholders, which has been strengthened by the ownership concentration and has been shown mainly as the controlling shareholders’ invasion and occupation of the minor shareholders’ benefit. For the tunneling of controlling shareholders, the pyramid structure is the carrier. The related party transaction is the main way. The pyramid structure and the related party transaction are both common in Chinese capital market, which caused high frequency of vicious tunneling behavior. The interests of those minor shareholders have been damaged, and the faith of the investors has been affected. Based on the pyramid structure perspective, this dissertation is focused on the influence factors and the occurrence mechanism of controlling shareholders’ tunneling behavior in the related party transactions.This dissertation reviewed systematically the literature of tunneling theory and summarized its development and limitations. By reference of the Bounded Rationality Model and the Opportunism Hypothesis, this dissertation constructed a mathematical model and analyzed the component and the occurrence mechanism of the tunneling behavior. Based on the analysis of the pyramid structure and the related party transaction, it elaborated the theoretic framework of the ultimate shareholders’ tunneling behavior in the related transaction under the circumstance of pyramid structure. It presented two research perspectives:one is based on the concept of structure; another is the concept of motive. According to the systematic theory, the organization structure can be divided into the external structure, the internal structure and the equity structure. This dissertation studied how the ultimate shareholders influenced the tunneling behavior by the three-dimensional structure. According to the Psychology and the Behavior Theory, there are three kinds of motives:the owner motive, the manager motive, and the two-in-one motive. This dissertation analyzed how those motives affected the ultimate shareholders’ tunneling behavior. At last, this dissertation tested those two research perspectives utilizing the data of Chinese listed companies, and acquired preliminary conclusions.There are four innovations in this paper. Firstly, this dissertation reviewed systematically the pertinent literature of tunneling, and chose the ultimate shareholders’ tunneling behavior under the circumstance of pyramid structure as a breakthrough point of study. It made a general analysis of the mechanism of tunneling behavior and proposed a counterbalance model of cost and benefit analysis. It elaborated the theoretic framework of the ultimate shareholders’ tunneling behavior under the circumstance of pyramid structure, and proposed the analysis model of its structure and motivation. Secondly, this dissertation made a three-dimension classification, which revealed the black box of pyramid structure. The concentration of this paper included how the ultimate shareholders affected the cost, the benefit, and further influenced the mechanism and channel of tunneling by the structure elements such as the quantity of chains, the quantity of hierarchies, the right of cash flow, the controlling right and the degree of complexity. Thirdly, according to the character of the subject, this dissertation divided the motive of tunneling into three classifications, and analyzed the influencing mechanism and channel of these three motives of the ultimate shareholders’ tunneling behavior. Fourthly, this dissertation made an empirical test and proposed relative policy suggestions according to the empirical results.