Study On Large Shareholder's Tunneling And Supervision Design

Recently some scholars have found the stock rights of most countries' firm are not disperse but quite convergence except of some few countries such as America and England. The disperse of controlling shareholders' stock rights results in another agency problem which minority shareholders are aggrieved by controlling shareholders. The controlling shareholders may use various means that is treasure occupied and dividend distribution in order to plunder the minority shareholders. The central conflict of interest between controlling shareholders and minority shareholders more crutial. Since 1990s, the benefit of having multiple shareholders has seen as limiting their tunnelling.Because of the special ownership structure, the tunnelling is more popular in China. From ST HOUWANG to Gu Chujun's KELONG, the largest shareholder uses lots of tunnelling ways to take up much resource from the listed company which does harm to the listed companies and investors, and result in bad performance of listed' companies. For this reason, it is very important to study the article about how to deal with the tunnelling of controlling shareholders.The article analyzes the agency problem of controlling shareholders and minority shareholders to post the degree of tunnelling by the treasure occupied and dividends distribution in China's listed companies. The research improves the comprehension of this problem and contributes to enhancing the corporate governance.The thesis surveys the academic researches on the agency problem of controlling shareholders which is based on internal and external actuality summarization. It also expounds the reason of the agency problem of controlling shareholder. The researchers all around the world have explored the research on controlling shareholders' tunneling deeply on many aspects, such as the reasons, ways, influences and resistant powers.This paper focus on the adverse effects of shareholders' tunneling on listed companies and the effect of those resistant powers, such as shareholding structure, corporate governance and so on. As to the adverse effects of shareholders' tunnelling on listed companies' financial status, the researches have explored those bad effects of the tunneling ways, such as transactions between related parties, except the way of expropriation of listed company's fund by controlling shareholder, and so on. Additionaly, in order to find out the tunnelling mechanism, the author divided the behavior into two main types, and concreted the problem by combining the behaviors and the essential cause of each type.In this thesis, by using empirical method the author studied the big shareholders' tunnelling. By analyzing the cases, the author outlined the problem's actuality, impact degree, and the relations between behaviors and controlling shareholders. From the author's point of view, to settle the tunnelling of controlling shareholders, we must validate listing companies' governance mechanism, straighten out supervision of controlling shareholders and protection of minority shareholders. At the same time, we need to consolidate external environment and institutions.The academic circle advances a new governance mechanism------the ownership structure of check and balance type with multiple large shareholders sharing the right of control and its governance mechanism------to counteract the large shareholders' infringement on minority shareholders. This is a check and balance mechanism among multiple shareholders sharing the right of control to prevent large shareholders from snatching corporate value and infringing on minority shareholder. It is both of a special ownership structure and of a check and balance governance mechanism. There are mainly three theoretical models explaining this governance mechanism. (1) Modelbased on improving the supervision efficiency. (2) Model based on reducing the infringement on the minority shareholders. (3) Mixed model. infringement on the minority shareholders. (3) Mixed model. A further analysis of governance mechanism with multiple large shareholders sharing the right of control shows there are two effects. On one hand it will decrease the cost incurred by the infringement on minority shareholders, on the other hand it will lead to the cost incurred by inefficient decision-making. Generally speaking other things being equal the probability of infringement on minority shareholders under the multiple large shareholder structure is less than that under the sole controlling-shareholder structure, especially when the enterprise is confronted with highly uncertain investment decision and rather risky operating environment. This paper suggests that multiple shareholders that monitor each other can efficiently limit the private benefits extraction in China. So Chinese listed companies should first remold the qualified agents for state-owned shares, and then change the ownership structure from one single shareholder to multiple shareholders.In the last of this thesis, the author used the theories of institutional economics, in order to search the institutional background and limitations of present institutions. At the end, the author provided the clues to settle the tunnelling problem from the point of re-designing and re-arranging the institutions.There are still many imperfections and irregularities in the corporate governance in Chinese listed companies. The outstanding problem is that controlling shareholder embezzles the listed companies' finance through improper related transactions and related means, expropriates the minority shareholders' interest and exhausts the profit of the listed company. These behaviors greatly undermine the corporate value and the interest of minority shareholders. So in order to improve the corporate governance of Chinese listed companies and check the controlling shareholder's behavior of tunnelling the minority shareholders' interest, there are much more need to do.