Study On The Emptying Behaviour Of Major Shareholders Based On Internal Control

In Chinese listed companies,the phenomenon of high concentration of shareholdings is quite serious.The minority shareholders are at a disadvantage compared to the major shareholders,while the major shareholders,in order to satisfy their own selfish desires,tend to use their absolute say to carry out emptying acts,and the interests of minority shareholders are infringed upon.How to curb the emptying of listed companies by major shareholders has become an urgent problem to be solved at present.In this paper,Zhongzhu Medical is selected as the subject of study to examine in depth the short-selling behaviour of its major shareholders.The case company is firstly introduced.In the case company,the top two shareholders hold the major shares and the degree of equity checks and balances is low.As a matter of common sense,the two major shareholders should have exercised checks and balances on each other,but instead they worked together to embezzle the interests of Zhongzhu Medical.There are many other irregularities,such as the illegal appropriation of large amounts of funds by related parties,the use of trust funds to avoid supervision,illegal guarantees and the acquisition of non-performing assets of related parties at a high premium.Secondly,based on the five elements of internal control,this paper analyses the causes behind the short-selling by its major shareholders through the principal-agent theory,information asymmetry theory and private gain theory of control,and finds that there are major deficiencies such as the combination of two positions,failure to fulfill information disclosure obligations on time,lack of professional risk control team and risk control procedures,and lack of independence of the supervisory board.The paper then analyses the consequences of the short-selling through the data published in the annual report of Zhongzhu Medical,and finds that the short-selling by the major shareholder led to a decline in the company’s daily operating efficiency and overall financial value,harmed the interests of small and medium shareholders,and led to the issuance of a non-standard opinion by the accounting firm.Based on the analysis of the causes of the large shareholders’ short-selling from the perspective of internal control,the paper proposes to curb the unification of two offices,strengthen the checks and balances of equity,emphasise the construction of professional risk control teams,improve the business approval process,motivate companies to actively disclose information and strengthen internal supervision.Finally,the analysis of the case companies concludes that connected transactions are the main way for large shareholders to achieve emptying,emptying can seriously affect the interests of small and medium shareholders,and inadequate internal control is an important reason for emptying.This paper provides reasonable suggestions for the further improvement of internal controls of listed companies in China.The promotion and implementation of these suggestions can improve the transparency and standardisation of corporate governance,curb the occurrence of emptying by major shareholders,protect the interests of investors and promote the stability and healthy development of China’s capital market.