Study On The Prevention Of Tunnel Excavation By Paslin’s Controlling Shareholders’ Connected Transaction Type

Connected transaction-based tunneling occurs frequently among listed companies in China.Although China’s regulatory authorities have issued relevant policies and regulations to restrain this behavior,the controlling shareholder’s tunneling through connected transactions still occurs many times based on the fact that one share is a common form of shareholding structure in China.The reasons for this are deficiencies in internal control of listed companies,low cost of violation and lack of awareness of rights of small and medium shareholders.In order to prevent the existence of corporate irregularities,China has been raising the standard requirements for the basic norms of corporate internal control,as well as paying attention to the regulatory laws and regulations.Then,it is valuable to study the ways,motives,mechanisms of action and economic consequences of controlling shareholders’ connected transaction-based tunneling behavior.This thesis uses literature research method,case study method and event study method to study the tunneling under the controlling shareholder’s connected transaction.Based on the principal-agent theory,information asymmetry theory,and signaling theory,we study the tunneling behavior of Paslin’s controlling shareholder’s connected transactions as a case study.First,we analyze the tunneling behavior of the controlling shareholder using connected transactions based on the events that occurred,mainly including high premium connected mergers and acquisitions,irregular connected guarantees,connected purchases and sales,and connected leases.Then,the intrinsic motives and external conditions of tunnel-digging behavior by controlling shareholders using connected transactions are analyzed,and after exploring the mechanism of connected transaction-based tunnel-digging behavior,the negative economic consequences of connected transaction-based tunnel-digging behavior by controlling shareholders to the company and small and medium shareholders are revealed.Finally,we provide preventive measures for tunneling behavior under connected transactions from the company’s perspective,the regulator’s perspective,and the investor’s perspective.This thesis concludes that(1)controlling shareholders’ tunnel-digging behavior using connected transactions is covert and persistent.(2)Intrinsic motivation and extrinsic conditions jointly drive the controlling shareholder’s tunneling behavior under connected transactions.(3)The tunneling behavior of connected transactions has an inverse effect on corporate performance.The purpose of this thesis is to explore the loopholes of the tunneling behavior under connected transactions and to propose relevant suggestions and measures.Thus,it can strengthen the vigilance of listed companies and small and medium shareholders,and also promote the healthy development of capital market.At the same time,the author hopes that the research in this thesis can enrich the cases and provide ideas for the subsequent academic research.