The Empirical Study Of Related Party Transactions Before And After The Spilt-share Reform

The ownership structure of China’s listed companies in transition economy showedfeatures of tradable and non-tradable shares separated and sole controlling shareholderdue to special historical background. The controlling shareholders prefer tunnelinglisted company resource for private benefits by related party transactions. The numerousvicious cases show related party transactions have become a serious problem in thecorporate governance of listed companies in China.Spilt-share reform broke the status of equity liquidity split and made stock turn intofull-circulation stage, eliminated the fundamental deficiencies in the system that hinderthe development of China’s listed companies. Thus the capital market enhanced itspricing function and institutional environment ran better. On that account, this paperexamined the actual changes in related party transactions and its influencing factors byemploying empirical analysis from many dimensions, based on a comprehensiveanalysis of the overall condition of all A-share listed companies from2000to2011inrelated transactions, which is from the institutional transformation perspective ofChinese equity division reform. The research found that the frequency and size of therelated party transactions increased year by year in the past12years, the frequencydistribution showed typical industry feature and concentrated in the manufacturing,information technology, wholesale and retail trade and real estate industries. The mostfrequent type of related party transactions are commodity trading, collateral andguarantees, as well as providing or accepting service. Regression results show thatrelated party transactions density is both positively correlated with the share proportionof the largest shareholder, negatively correlated with Check-and-Balance of Ownership,the proportion of floating stocks and managerial ownership before and after the sharereform. Moreover related party transactions density is positively correlated with thetotal annual salary of the directors, supervisors and executives before the share reform, which turns into negatively correlated after the share reform. It is not yet significant forindependent directors to affect related party transactions. Finally some supervisionsuggestions such as perfecting legal system, strengthening information disclosure,improving corporate governance and equity restriction are proposed.