An Analysis On Controlling Shareholder’s Expropriation Based On YAXING Chemical Ltd

China capital market has problems of high shareholding concentration, weaksupervision mechanism and improper governance structure. In China, controllingshareholders are likely to take up funds of the listed companies in a variety of ways.Which lead controlling shareholders to expropriating the interests of the listed companiesand minority shareholders, also hindering the development of China’s capital market,thus it’s significant to prevent the behavior of controlling shareholder taking up funds.This paper firstly summarizes the relevant research both at home and abroad,combined with the actual situation in our country, and analyzes the case of controllingshareholder’s expropriation which taken place in YAXING chemical Ltd recently. Underthe background of the falling export demand, increasing raw material prices, excesscapacity and the real estate regulation policy, YAXING group could not receive the returnby the early expansion, in the case of a terrible shortage of funds, YAXING group totallyexpropriated more than2.8billion Yuan through a variety of ways, which had a badinfluence on the listed companies as well as capital market. Then this paper makes ananalysis of the reasons，methods and damages of the expropriation. The reasons are thehighly concentrated shareholding structure, the imperfectly governance structure, the lowexpropriation cost, the inefficiently external supervision and the conflict of interestbetween the major shareholders and the minority shareholders. At present, controllingshareholders normally expropriate funds through direct embezzlement, related-partytransactions and the guaranteed loans. These behaviors will bring serious consequencesin many fields, for instance it would have a strong impact on the performance of listedcompany and reputation, reduce the income of minority shareholders and theirconfidence in the listed company, and hinder the capital market order and construction.At the end, this paper puts forward six suggestions to prevent controlling shareholder’sexpropriation, which are optimize the equity structure, perfect the governance structure, raise thecost of controlling shareholder’s expropriation, strengthen the capital market supervision, expandenterprise’s financing channels, strengthen the consciousness of minority shareholders.