Research On Governance Of Tunneling Behavior Of Listed Companies Ultimate Shareholders

Up to now, the capital markets in China have developed for less than 20 years, so the laws, regulations, and systems are far from being perfect when compared with developed countries in the western world. This makes it possible for ultimate shareholders of listed companies to adopt tunneling behaviors, which consists a "chronic illness" that disturbs the normal and steady development of capital markets in China. By constructing the ownership structures of "pyramid" type, ultimate shareholders have realized a minority control of listed companies. Furthermore, ultimate shareholders would conceal themselves in the "pyramid" structure of ownership by making use of the deviation of cash flowing rights and controlling rights; meanwhile, they would adopt tunneling behaviors to transfer the capital, which would harm the value of listed companies, and the interests of small and medium shareholders. The tunneling behaviors by ultimate shareholders have violated the basic principles of "openness,fairness, and justice", and then seriously undermined the cornerstone of the stock markets, i.e. the healthy development of listed companies.Therefore, the inquiry into the tunneling behaviors by various ultimate shareholders is extremely important both in practice and in academic study, which would improve the governance of listed companies, protect the legitimate rights and interests of small shareholders, and promote the sustainable development of listed companies.This paper takes the listed companies before December 31,2007 as its object; it aims to monitor and prevent the tunneling behaviors of ultimate shareholders of listed companies;and it adopts empirical research as the major method, and standardized research as the supplement method. Based on the study of foreign scholars such as LLSV,and domestic scholars,this paper traces back to the ultimate shareholders along the control chains of listed companies adopting tunneling behaviors; and it thoroughly inquires the tunneling behaviors of ultimate shareholders of listed companies in China.This paper inquires the major contents as follows:Firstly, on the aspect of the costs & benefits of tunneling behaviors by ultimate shareholders, it builds the profit function of the tunneling behaviors by ultimate shareholders, and reveals the intrinsic motivation of the tunneling behaviors by ultimate shareholders with the method of mathematical analysis. The conclusions are as follows:(1) In the tunneling behaviors by ultimate shareholders, the benefits are greater than the costs, which is the main ultimate motivation of the tunnel acts by ultimate shareholders.(2) The deviation of cash flowing rights and cash controlling rights has increased the profit of the tunneling behaviors by ultimate shareholders, which is an important intrinsic motivation behind the tunnel acts by ultimate shareholders.(3) The book value of listed companies is too low, which is a certain motivation behind the tunneling behaviors by ultimate shareholders.Secondly, this paper inquires the external system source by which the tunneling behaviors by ultimate shareholders have come into being, including the external organizational system, property nature of controlling rights, and legal environment; and it further exams it, using the empirical data of listed companies with the method of Multiple linear regression. The conclusions are as follows:(1) When the Equity ratio holding by the ultimate shareholders of government in the listed companies under its control is too low, the extent of the tunneling behaviors is lower than the listed companies controlled by private ultimate shareholders. On the contrary, it is higher than the listed companies controlled by private ultimate shareholders.(2) The extent of the tunneling behaviors in the listed companies controlled by the ultimate shareholders of higher governmental degree is lower than those controlled by the ultimate shareholders of lower governmental degree.(3) The extent of the tunneling behaviors in the listed companies controlled by private ultimate shareholders is higher than those controlled by the ultimate shareholders of government.(4)To the listed companies controlled by the ultimate shareholders of government with more controlling chain-levels, the extent of the tunneling behaviors is lower than those controlled by the ultimate shareholders of government with fewer controlling chain-levels.(5) To the listed companies controlled by private ultimate shareholders with more controlling chain-levels, the extent of the tunneling behaviors is higher than those controlled by private ultimate shareholders with less controlling chain-levels.(6) To the listed companies in the eastern coastal areas, or Beijing and Tianjin, where there is a better legal environment, the extent of the tunneling behaviors is lower than those in the central and western regions.Thirdly, using the method of multiple linear regressions, this paper conducts an Empirical Study about the tunnel acts by ultimate shareholders of listed companies, and find out the indicators by which the tunneling behaviors of ultimate shareholders can be identified, including asset size, receivables, other receivables, current ratio, the degree of separation between two rights.Fourthly, with the empirical data of listed companies, this paper uses the method of logistic regression, and finds out the issues that can control the tunneling behaviors of ultimate shareholders, including:the issuance of overseas shares, the size of listed companies, the Audit Committee, a limitation about the part-time job of ultimate shareholders in listed companies, and lower controlling power by ultimate shareholders.Lastly, on the ground of the research above, it provides corresponding countermeasures and suggestions for supervising and preventing tunnel acts by ultimate shareholders, improving relevant systems and regulations, and developing corporate governance of listed companies.The main innovations of this paper are as follows:(1) From the aspect of ultimate shareholders, it analyses the intrinsic motivation of their tunneling behaviors.(2)It considers the three aspects such as the External Organization, Property Rights and legal environment comprehensively; it studies the external source of systems; and it exams with empirical data of listed companies for the first time.(3)For the first time, it finds out the concrete indicators for identifying the tunneling behaviors by ultimate shareholders in an empirical way.(4)It finds out the issue which can be used to control the tunneling behaviors by ultimate shareholders in Internal & external Governance.