On Tunneling Behavior Of Major Shareholders In Family Businesses

Since the establishment of Chinese capital market,the Chinese government and relevant regulatory agencies have successively issued a series of policies and regulatory measures to contain the expropriation of major shareholders and continuously strengthen the protection of minority shareholders.Even so,the tunneling behavior of major shareholders of listed companies in China has been frequently exposed,and the tunneling methods by major shareholders have emerged endlessly,from the capital expropriation,the unfair related transactions to reduction of cash holdings and the expropriation under equity pledge.The tunneling behavior of major shareholders has become the stubborn disease of Chinese capital market.Although it has been repeatedly condemned by China Securities Regulatory Commission,it has not yet been eradicated.As a common form of enterprise,family business plays an important role in Chinese economic development.And major shareholders of family businesses tend to exist in the form of family.They have the absolute control of enterprise,which can influence the decision-making of production,operation,investment and financing.And the internal governance structure and the management way of family businesses is more complex than non-family businesses.It facilitates tunneling of major shareholders in the listed companies,so tunneling of major shareholders in family businesses is particularly prominent.At present,there are abundant researches on tunneling of major shareholders,and there are many empirical researches on the perspective of family businesses,but few case studies are involved.Therefore,this paper selects the family business Huaze Cobalt Nickel as the case study object to discuss tunneling behavior of major shareholders in family businesses.This paper mainly uses case study methods for analysis.In the theoretical analysis part,based on the review and summary of related literatures at home and abroad,this paper expounds the concept of family business and the characteristics of family business,and summarizes the theoretical basis of tunneling of major shareholders in family businesses.In the case study part,in order to better study the reasons and influences of tunneling of the major shareholders in family businesses,the case of tunneling of the Wang family in Huaze Cobalt Nickel was selected as the research object.This paper analyzes the path of the Wang family's tunneling and the adverse effects on the listed company,minority shareholders and capital market.Combined with the internal governance characteristics of Huaze Cobalt Nickel as a family business,it analyzes the reasons why the Wang family can implement tunneling behavior.Finally,it proposes corresponding solutions to the internal governance problems and external supervision defects of Huaze Cobalt Nickel,in order to reduce tunneling problems in family businesses.The research in this paper finds that due to the share holding concentration of family major shareholders,ineffective internal audit supervision on internal control,excessive family involvement in corporate internal governance,opaque disclosure of information,coupled with the low cost of non-taxation and the failure of the supervision of intermediaries,which led to tunneling behavior of Huaze Cobalt Nickel major shareholder,the Wang family,seriously damaged the interests of the company and minority shareholders,harmed the capital market.In this regard,this paper proposes to consider from the perspective of internal governance,family businesses can optimize ownership structure to control family major shareholders,ensure the independence of internal audit,clarify the rights and responsibilities of the family member and its affiliated members,strengthen the supervisory role of the board of directors and the board of supervisors,and expand relevant information disclosure content of family businesses to improve the transparency of information disclosure.From the perspective of external supervision,increasing the cost of violation by major shareholders and strengthening the supervision role of intermediaries can contain tunneling behavior of major shareholders in family businesses and protect the interests of minority shareholders.This paper chooses the family business as the research object to discuss the tunneling problem of the major shareholders,which is innovative in the research content.