A Discussion On Controlling Shareholders' Interest Transfer Behaviors In Listed Companies

In China, the ratio of shares concentration is very high. There are many productive or unproductive exchanges between controlling shareholders and listed companies. When the legal system about the protection for minority shareholders' interest is imperfect, it leads to controlling shareholders' interest transfer behaviors, e.g. unfair related party transactions, funds secured and expropriated funds and other means, to ruin listed companies and expropriate minority shareholders' interest.With the development of the corporate governance and financial theory, controlling shareholders' behaviors and its consequences are becoming an international issue. China's current macroeconomic environment and the special equity structure of listed companies have provided a rare opportunity for the development of this field. After reviewing the relevant literature, controlling shareholders' interest transfer behaviors have been analyzed based on financial theory and case studies.The concept of interest transfer is defined from two aspects— Tunneling and Propping .It is believed that the propensity to tunnel is correlated with the propensity to prop ,in other words, that transfers in and out of firms are symmetric. Controlling shareholders choose how much to expropriate, but they can also inject private cash today in order to preserve their options to expropriate and to obtain a legitimate share of profits tomorrow. Meanwhile, the article also summarizes the current situation of controlling shareholders' interest transfer behaviors. Controlling shareholders' interest transfer behaviors are prevalent in both China and foreign countries, and controlling shareholders often use related party transactions, and dividend policy to expropriate minority shareholders' interest. With the case studies on controlling shareholders' interest transfer behaviors, it is proved that controlling shareholders' interest transfer behaviors will expropriate the interest of minority shareholders, damage listed companies and hamper the development of the capital market in China.With the use of the principal-agent theory and the theory of property rights, controlling shareholders' interest transfer behaviors and their causes have been analyzed. Controlling shareholders can take charge of listed companies based on all shareholders' trust and controlling shareholders should not take advantage of their dominant position to expropriate the interests of other shareholders. From the perspective of a cost-benefit analysis, controlling shareholders and minority...