| Some M&A happened only to satisfy the controlling shareholders' self-interest intention. Even these M&A is not necessary or disadvantary to the company.Bea, Kang and Kim (2002) show that managerial objective and corporate governance playing important role in manager's M&A decision. Tunneling is the only true motivation in some M&A.The M&A of controlling shareholders' self-interest intention (hereafter we brief call it: self-interest M&A) in this paper, is the M&A that controlling shareholder make use of controlling power to get private benefit trough M&A while other shareholder cannot get advantage or even be expropriated. Tunneling through M&A is the main self-interest M&A and harm greatly. The self-interest M&A exist in most countries especially stand out and intensely in the background of "single big shareholder" in China.In the situation of highly concentrated ownership, controlling shareholder often mission top managers and dominate the strategy and daily operation. The minority shareholder usually disables to participate in operation, and have a virtual agency relationship.The existence of blockholder have dual act on the minority shareholder and company's value. In the one side, as possess most cash flow of the company, the blochholder have the motivation to supervise the managers and strive for the maximum of company's value, thus coming into being the incentive effect. In the other side, the blockholder control the company, being able to get the private benefit on the expense of minority shareholders' interest, thus coming into being the entrenchment effect. The appearance of self-interest M&A is the result of the entrenchment effect becoming dominated.The self-interest M&A mainly achieve through connected party M&A, but not all the connected party M&A are self-interest M&A. Some times the blockholder help the listed company by connected party M&A. Friedman, Johnson and Mitton (2003) showed that controlling shareholder would use private resources to save the listed company in case of financial distress, that is propping. The appearance of propping is the result of the incentive effect becoming dominated. Minority shareholders are benefited or harmed by the controlling shareholder's different behaviors. The incentive effect and the entrenchment effect existing at the same time and acting on opposite direction, increase the difficult of studying the self-interest M&A. The arrangement of ownership affecting corporate governance and corporate value complicatedly is the hotspot in the academicals field.In our county, the controlling shareholders of listed company usually possess high percent shares and dominate the board and management, so can self-interest conveniently. In the outside of listed company, the law that protects investors is perfected stage by stage. The main agency conflict exists between controlling shareholder and minority shareholders. The controlling shareholder tunneling the company by self-interest M&A has run to serious situation. While studying the motivations, types and effects systemically are still insufficient.As the relative studying show, the controlling shareholder's behaviors obey the Homo Economics and often seek maximum of self-interest and expropriate minority shareholders. Most propping is mid and short time aim, the ultimate target is still tunneling. Only when the listed company is faced with "preserve listed position" or "preserve the chance of seasoned equity offering" that affect the long-run interest, the controlling shareholder would propping the listed company through connected party M&A, and after aim achieved the controlling shareholders would expropriate the minority shareholders again. Propping is the controlling shareholder realizes long-run interest at the expense of short time interest. Expropriating minority shareholders is the true purpose of controlling shareholder. Of course, there are still some controlling shareholders impel M&A to integrate the resources between controlling shareholders and listed companies. But tunneling through M&A has become large party of all the M&A.The controlling shareholder's propping and tunneling hide in the connected party M&A and often go through mixed and time and again, which puzzles the minority shareholders and supervisors. Therefore, it is necessary to study self-interest M&A deeply for the healthy development of stock market. People want to know which kind of M&A is self-interest? How the controlling shareholder gets private benefit through self-interest? What factors make the M&self-interest? Is the market able to detect the self-interest M&A? What degree the minority shareholders are harmed? How to prevent the controlling shareholder from expropriating minority shareholders?Because of the secrete character of self-interest behavior, maybe we can only use indirect evidence to study tunneling. This paper design empirical study method, eliminating interfering factors, matching the self-interest M&A and no self-interest M&A, analyzing M&A all-round, especially focus on the effect cash flow and accounting index, to recognize the aim of controlling shareholder. The objective of this paper is to see through the self-interest M&A and identify the measures and outcome of the transferring resource from listed company by the controlling shareholder. This paper try to bring up with advice about how to strengthen corporate governance and stock market supervise and confirmation the confidence of investors.Dissertation consists of seven chapters.Chapter 1: An introduction that covers areas. This chapter briefly introduces the backgrounds and issues, contents and framework, as well as the contributions of the paper.Chapter 2: Theoretical literature review. This chapter briefly introduces theory on the agency and M&A, as well as research situation about self-interest M&A abroad and domestic.Chapter 3: Analysis of self-interest M&A cause. Base on the relative theories and practice, this chapter analysis's the cause of self-interest M&A and build new model.Chapter 4: Analysis of method and influencing factors. This chapter enumerates methods and using empirical tests to probe into how the factors influence self-interest M&A.Chapter 5: Tests on the stock market reaction to the self-interest M&A. This chapter use event study to analysis how the stock market react to the announcement of self-interest M&A? Could the stock market detect the self-interest M&A? What impact on the value of company value by the news of self-interest M&A in short period?Chapter 6: The long-run effect of self-interest M&A. This chapter bases on the long-run return, financial indexes, EVA and cash income to discuss the long-run effect of self-interest M&A on listed company.Chapter 7: Conclusion and suggestion. This chapter concludes the research, put forward some suggestion about self-interest M&A and point out the limitation of the research.After reviewing the theoretical research and empirical testing, this paper have some main findings: (1) There are some evidences show that controlling shareholder transfer resources from listed company, harm the value of company and expropriate minority shareholders. (2) The model this paper designed shows that tunneling and controlling shareholder's shares have a inverted "U" relationship, tunneling and difference between cash flow and control right have a direct proportion relationship. The empirical results sustain the model. (3) The reason of huge amount self-interest M&A in Chinese stock market is not perfect corporate governance and market system design. To prevent self-interest M&A we should increase legal supervises and shareholder's mutual control. (4) The means self-interest M&A used include buying shares, buying assets, and so on, and usually are connected party M&A. The market cannot detect self-interest M&A in short period. But when the research window spread, the matching samples have significant difference, which show the market can detect self-interest M&A slowly. (5) Two years later the share price and accounting index of self-interest M&A significantly lower than the matching samples, which show the controlling shareholder have transferred resources from company and the benefit of minority shareholders' is harmed. (6) The empirical results show the characters of self-interest M&A is relate to region, which show the system factors affect self-interest M&A. The better local market environment, the less self-interest M&A. (7) the shares controlling shareholder has affect the result of M&A, which supports the hypothesis of incentive effect and entrenchment effect.The innovative achievement of this paper can be found in the following aspects.1. This paper basing on the Chinese stock markets data studies the cause, means, market reaction and results, covering the resource being transferred by the controlling shareholder. This paper mainly using the matching study method compare the connected party M&A and non-connected party M&A, grouping the M&A by their characters and using judgment and factor decompose. The research point and method of the paper are unique.2. Basing on pre-research achievements and Chinese market characters, this paper give some appropriate hypothesis, build a model of self-interest M&A, achieve six important lemma, to interpret some made empirical studies. This paper simultaneity considers the influencing factors inside and outside the company, and show the shares hold by controlling shareholder and expropriate has a inverted "U" relationship. There is a maximum point that controlling shareholder expropriates the minority shareholders. The difference between cash flow and control right has a direct proportion relationship with expropriate.3. This paper is different to relative made research in model, variable and period. For example, the paper synthesize the standards presented on the authority journals to judge the characters of self-interest M&A. Using Matching method, eliminate the influence of industry, size, return and economics cycle, and successfully study the influence of the difference between control right and cash flow to self-interest M&A.4. This paper system using multi-factors analysis to do empirical study. For example, the paper use 5 effect indexes to observe the measure influencing research process and results, which bring forward reference to later study on M&A effect.
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