Research On The Cause And Economic Consequences Of The Tunneling Of Large Shareholders In Listed Companies

Based on the centralized shareholding structure of Chinese enterprises in general,the second type of agency problem in corporate governance has been widely concerned.As the majority shareholders occupy the dominant position of control,they are likely to encroach on the property of listed companies for private interests,which not only seriously infringes on the interests of other small and medium shareholders,but also hinders the healthy and sustainable development of China’s capital market.However,the weakness of the market regulation gives the space for the major shareholders to take advantage of the situation.In addition,as the negative impact of the COVID-19 on the global economy continues,major shareholders will face increased financial pressure and even the risk of capital chain rupture,and will also worry about their own wealth will shrink due to the difficulty of maintaining business,thus have a stronger motivation to tunneling.At the same time,the turbulence in the capital market will greatly weaken the external regulatory power.Therefore,under the current economic situation,it is more important to pay full attention to the tunneling behavior by major shareholders.The major shareholder of Soling use various means to transfer benefits and make financial fraud in order to cover up the facts,and the bad behavior was criticized by the CSRC,so that this article takes Soling as an example.Based on the theory of control self-interest,principal-agent theory and information asymmetry theory,this paper analyzed the causes of benefits expropriation by major shareholder;collated in detail the specific means of benefits expropriation by major shareholder;using the financial index method,comparative analysis method,Z-score model and event study method,this paper explored the economic consequences of tunneling.This paper finds that: the pursuit of private interests by major shareholder and the financial pressure are the motives for his tunneling behavior;moreover,the weakness of the company’s internal governance and the absence of external supervision provide great convenience for the smooth realization of the benefits expropriation.The tunneling behavior involves external investors to bear the bad consequences and affects the normal production and operation of the company,threatens the survival of the company;at the same time,the tunneling behavior widens the information gap between market players,which will lead to the reduction of resource allocation efficiency and frustrate investors’ enthusiasm,and ultimately endangers the stable development of China’s capital market.In order to effectively prevent and control the tunneling behavior of major shareholders,this paper puts forward several suggestions for optimizing the company’s internal governance and external market supervision according to the causes of the tunneling by major shareholder of Soling.Besides,in addition to the internal and external aspects of the company,investors,as one of the main participants in the capital market,improve their ability to identify the tunneling is also crucial to curb the transfer of interests by major shareholders.Therefore,this paper innovatively proposes several methods for external investors to identify the controlling shareholders’ tunneling: pay attention to the pledge of equity of major shareholders;analyze the rationality of counterparties and transactions;pay attention to abnormal changes in other receivables,a significant risk point;be alert to the situation where the company’s behavior deviates from the overall state of the industry;and obtain information from multiple sources with the power of online media.There are various forms of controlling shareholders’ tunneling,such as illegal guarantee,transfer of assets through connected transactions and pledge of equity,which are dazzling and defensible.This paper links theory with practice,delves into the motives,conditions and economic consequences of the benefits expropriation by major shareholders,and puts forward targeted and feasible suggestions,which are important for improving corporate governance and protecting the legitimate rights and interests of small and medium-sized investors.