Study On The Tunneling Behavior Of Major Shareholders

China's capital market has undergone considerable development and is becoming more and more mature.Going public has already become the goal of many companies.Once successfully gone public,not only can the company boost its reputation,but it can also finance projects with considerably more venues.However,the stockownership structure,the family-style management and the absence of external oversight has made it possible for the major shareholder to empty the company's assets.The current legislations and regulations do punish such tunneling behaviors,but the severity of the punishment pales comparing to the massive gain of the tunneling.This dissertation first analyze the likely conditions for tunneling to occur,and the various forms of tunneling,then it provides suggestions on how to prevent tunneling,thereby making a meaningful contribution to the discussion.This dissertation sorted through past research done on the conditions,forms and economic results of tunneling.Based on the theory of equity checks and balances,principal-agent theory and information asymmetry theory,this dissertation analyzes in detail the behavior of Zhuang Min,the major shareholder of Jiangsu Protruly Video Technology Group Co.Ltd.,when he tunnel the company in 2015-2017.The tunneling process,tunneling mode,tunneling causes and effects are all included in the analysis.Researches show that the main ways of major shareholders tunneling companies include asset restructuring and fraud,seizing control rights of companies,transitional foreign investment,conveying benefits through affiliated transactions,irregular guarantees and arbitrarily occupying funds,etc.The main causes of tunneling include an unreasonable ownership structure,the absence of check and balances among shareholders,the lack of internal control and external supervision,and the lack of order in the company's management.The final result of tunneling,on the one hand,deteriorates the company's financial indicators and bring the company to the edge of bankruptcy.On the other hand,it also causes heavy losses to the small and medium shareholders,creditors and internal workers of the company.Therefore,optimizing the ownership structure,improving the company's internal management system and strengthening external supervision may play a preventive and restraining role for major shareholders.