Mechanism Study Of How Executive Equity Incentive Affects Controlling Shareholder's Tunneling

The second agency problem,represented by controlling shareholder and minority shareholder's information asymmetry of listed companies,has becoming a hotspot in academic research;and “Tunneling” by means like capital occupy,debt guarantee and profit transportation is one of the chronic diseases in China corporate governance area.Although the relationship between executive equity incentive and controlling shareholder's tunneling has got some scholars attention,its interact relation and influence mechanism were lack of theoretical basis and standard of inspection,this paper focus on researching executive equity incentive and tunneling restriction of controlling shareholder.Controlling shareholders,colluding with managers,tunnel assets form listed companies have becoming a general circumstance in China,under an approximate external shock of equity incentive,managers change its identity because of share-holding,which affects tunneling form internal mechanism.In this paper,we introduce collusion compensation in agency model,and explore how executive equity incentive affect the stability of collusion and top shareholder tunneling extent;through numerical simulation and normative analysis,we elucidate the mechanism of executive equity incentive acting on top shareholder.Tunneling from three levels: income effect,risk effect and position transformation effect,we reveal these affection's differences among top shareholder heterogeneity and different regime scenario.Treat A-share listed companies as object,after panel regression we find that executive equity incentive could restrain top shareholder tunneling extent;stronger tunneling motivation in top shareholder heterogeneity and companies more conducive to tunneling in regime scenario show more significant impact in executive equity incentive's restraint,which will contribute to protecting investors as an internal governance mechanism;quasi natural experiment and PSM-DID robust test supports our hypothesis,and two-year group shows more significant effect.Our study finds that executive equity incentive can restrain controlling shareholder's tunneling;as the result of equity incentive,executive stock holding also has the restraint effect.In terms of tunneling motivation,conditions like the pyramid with complex controlling structure,controlling shareholder has high proportion of shareholding and corporate has high degree level in ownership and control right separating,equity incentive has a more significant restraint effect in tunneling.In terms of tunneling environment,conditions like corporate have low marketization degree,belong to state-owned holding and group holding,equity incentive has a more significant restraint effect in tunneling.Our study shows the existence of top shareholder tunneling as well as its instability with manager,which provides enlightenments to puting forward policies of restraining top shareholder tunneling form governance mechanism both internal and external.