Research On Tunneling Behavior Of Major Shareholders From The Perspective Of M&A Funds

The over-concentration of equity in listed companies in China has led to serious agency conflicts between major shareholders and small and medium shareholders.It is not uncommon for major shareholders to damage the interests of small and medium shareholders.In March 2018,the China Securities Regulatory Commission announced the key areas and work arrangements for inspection and law enforcement in 2018.Among them,the focus of investigating and handling serious violations of laws and regulations includes: major shareholders,actual controllers,and directors,supervisors and senior personnel of listed companies through illegal guarantees,capital occupation,a case of maliciously tunneling a listed company through affiliated transactions.Although the supervision of the capital market by the China Securities Regulatory Commission has been continuously strengthened,the cases of major shareholders taking advantage of their control rights to tunneling listed companies have been repeatedly banned,and the methods of tunneling have also emerged one after another.With the continuous development of my country’s capital market,company mergers and acquisitions have become more frequent.In order to reduce the risk of mergers and acquisitions,some new mergers and acquisitions models have gradually emerged in the capital market,the domestic emerging“PE+listed company”M&A Fund model in 2015 is one of them In this M&A mode,due to the participation of professional investment institutions,the M&A target can be locked in advance,and the target company can be managed after the investment,which can theoretically effectively reduce the M&A risk.However,because the behind-the-scenes investment relationship is difficult to clarify and there is relatively little information disclosed to the outside world,M&A funds can easily become a tool for large shareholders to hollow out,thereby damaging the interests of the company and small and medium shareholders.After sorting out the relevant literature,based on information asymmetry theory,principal-agent theory,and corporate governance theory,this paper selects ZY company as the research object.Study the tunneling behavior of major shareholders,focusing on the specific paths of major shareholders’ tunneling,the reasons for tunneling,and the economic consequences of tunneling.This paper firstly introduces the main body of mergers and acquisitions and the transaction process of mergers and acquisitions;secondly,it analyzes the specific paths of M&A fund partners and major shareholders;The reasons for the tunneling,and using the financial index analysis method,the event study method and the Tobin Q value method to study the adverse economic consequences of the tunneling event on the listed company;The governance level of listed companies and the suppression of the tunneling behavior of major shareholders have put forward targeted suggestions.The conclusions of this paper are as follows: first,in this case,M&A funds are tunneling vehicles for large shareholders to carry out tunneling,the listed company ZY bought the target company,XT,at a high premium,which caused the M&A fund project to exit at a high premium,large shareholders profit;at the same time High Premium M&A in the short term to drive up the share price,large shareholders through further profit reduction.Second,the major shareholder’s own financial crisis is the major shareholder’s motive for tunneling.The unreasonable ownership structure and the lack of effective supervision and management mechanism are the internal opportunities for large shareholders to carry out tunneling;while the lack of sufficient risk awareness of small and medium shareholders and the lack of external supervision are external opportunities for large shareholders to carry out tunneling.The establishment of an M&A fund can reduce the risk of company mergers and acquisitions,which is an excuse for major shareholders to implement tunneling.Third,the tunneling of major shareholders will bring adverse economic consequences to listed companies.ZY’s solvency,operating ability,profitability and development ability have been affected to varying degrees,and the gap with the industry is constantly widening.In addition,the tunneling of major shareholders has lowered investors’ expectations for ZY in the capital market.After the merger,the cumulative excess rate of return is low,and the stock price has dropped significantly after a brief rise.Fourth,in order to curb the tunneling behavior of major shareholders,listed companies should build a diversified shareholding structure and give play to the role of small and medium shareholders in corporate governance;external regulators should improve the employment and management system of independent directors in a unified manner,increase supervision and improve illegal activities.Costs;small and medium shareholders also need to improve their awareness of risk prevention and take the initiative to exercise their legitimate rights and interestsThis paper studies the use of M& A funds by major shareholders for tunneling,and enriches the literature on tunneling methods and the risks of establishing M&A funds.At the same time,the research conclusions of this paper can also help small and medium shareholders to enhance their vigilance against the behavior of large shareholders to use M&A funds to tunneling listed companies and reduce investment risks;promote listed companies to further improve their corporate governance structures and standardize corporate governance systems;at the same time,it is also conducive to Regulatory agencies have formulated targeted regulatory measures to restrain major shareholders from using M&A funds to hollow out listed companies from the root of the system,and promote a virtuous circle of development of the capital market.