Research On Controlling Shareholder Tunneling In Performance Commitment Of Offcn Education

The initial purpose of performance commitment set up in China is to safeguard minority shareholders,and meanwhile,to restrict large shareholders from watering the valuation of underlying assets in mergers and acquisitions.However,in practice,performance commitment contracts signed by listed companies have become a tool for tunneling used by large shareholders instead.Therefore,it makes sense to investigate the motives and ways of large shareholder tunneling through performance commitment contracts,and further explore the impact on minority shareholders,which is significant to prevent large shareholders from tunneling through performance commitment.According to large sample testing results,listed companies in performance commitment periods generally tend to distribute less cash dividends than those without performance commitment contracts.However,for listed companies with controlling shareholders,performance commitment agreement cannot restrain their desire and standard of cash dividend allocation.By the specific case study of Offcn Education Company,the means of tunneling used by controlling shareholders during the operation of performance commitment is discussed,which expropriates minority shareholders.Then,reasons for tunneling in Offcn Education’s performance commitment are analyzed and economic consequences are evaluated,resulting from controlling shareholders stealing funds from the public selfishly.Based on empirical research outcomes and the specific case of Offcn Education’s tunneling with performance commitment,this paper brings forward proposals to restrict the risk of tunneling by large shareholders of listed companies through performance commitment contracts.