A Study On Related-party Transactions And Controlling Shareholders' Expropriation Problem In China's Listed Companies

Under the background of China's weak supervisory system, high shareholding concentration and improper governance structure, the related-party transactions in Chinese listed companies are frequent and the amount is huge, which lead to controlling shareholders' manipulating earnings and expropriating minority shareholders. Lots of recent cases also show empirical evidences. Now the urgent problem which should be solved is how to keep controlling shareholders' tunneling within limits and protect the benefits of minority shareholders.This paper does in-depth research on controlling shareholders' expropriation. It starts with the introduction of relative domestic and foreign research achievements, then analyzes the relationship between related-party transactions and expropriation of controlling shareholders and examines a sample of related-party transactions during 2001-2006. Through econometric models, effect of related-party transactions on the market value and performance of companies and effect of some influencing factors on related-party transactions are estimated. At last, this paper gives some suggestions on the basis of previous research.The conclusions are as follows. Related-party transactions is one of the most important way which controlling shareholders expropriate minority shareholders, and four kinds of related-party transactions including commodity, asset, cash and guaranteed mortgage are more frequent. Controlling shareholders' expropriation commits to the reduction of market value and profit of listed companies. Independent directors, supervisory board, low holding-share proportion of controlling shareholders and high circulation share proportion can restrain expropriation of controlling shareholders, while state-owned shareholders are much easier to expropriate minority shareholders.