A Discussion About The Motivation And Consequences On Tunneling By Large Shareholders Of Family Companies

Family business is an important part of listed companies in China.According to statistics,the number of private listed companies in China has gradually increased in recent years,and the proportion of listed companies in China has gradually increased.In private enterprises,family businesses account for more than 90%.In 2017,more than half of China's GDP was created by family businesses.However,at present,there are still many problems in the development process of listed companies in China,especially family listed companies.Among them,the problem of “ tunneling ” of major shareholders is becoming more and more serious,which not only damages the interests of every investor,but also improves the development of China's capital market.It poses a direct challenge to the integrity of the system.Therefore,it is of practical significance to study the “empty” behavior of major shareholders under the special governance structure of family businesses.Firstly,this paper applies the method of theoretical research to analyze the motives of the implementation of “tunneling” of the major shareholders in the family business from the perspective of private benefits of control rights.From the perspective of information asymmetry theory and equity balance theory,this paper analyzes the implementation of major shareholders in family enterprises.The condition of "tunneling";from the perspective of the efficient market hypothesis,the consequences of the "tunneling" of the major shareholders in the family business are analyzed.The study found that in the family business,the large shareholder's acquisition of the familyowned control private benefit is the motivation for the major shareholder to implement the “tunneling”,while the family business has low equity balance and serious information asymmetry."The behavior creates conditions,and ultimately the impact of the "tunneling" behavior of the major shareholder will be reflected by the company's stock price changes.Secondly,this paper applies the case study method,selects the Wang family's "short-cut" *ST Huaze listed company event as a case,combined with the results of the above theoretical analysis,analyzes the motivation,conditions and path of the Wang family's implementation of "tunneling".The study found that when the industry environment in which the company is located deteriorates the profitability of listed companies and the related parties encounter financing difficulties,the major shareholders will “tunneling” the listed companies in order to maximize the family interests.The high concentration of equity in family businesses and the multiple membership of the family members make it more likely that large shareholders will use their subsidiaries to manipulate their performance and “tunneling” listed companies through illegal guarantees,frequent pledge of equity,and concealment of connected transactions.Finally,this paper applies the event research method to analyze the stock price fluctuation caused by the occurrence of “tunneling” events,and studies the economic consequences of the “tunneling” event.The study found that the exposure of large shareholders in the family business "tunneling" behavior will lead to a sharp fall in the company's stock price,a decline in corporate value,a deterioration in financial conditions,and a serious violation of the interests of minority shareholders.According to the research conclusions,this paper suggests that listed companies,especially family businesses,should construct a reasonable shareholding structure,improve the independent director system and internal control system,increase supervision of the directors' network,broaden the financing channels of private enterprises,control family involvement and attach importance to external Audit and media supervision.