Causes And Economic Consequences Of Major Shareholders’ Hollowing Out Of Listed Companies

Due to the defects in internal governance of listed companies in China’s capital market,such as over-concentration of equity,difficulty in responsibility of independent directors,and family management,the hollowing behavior of major shareholders,such as appropriation of funds,has been existing since the formation of China’s capital market.As a pharmaceutical "white horse stock",this paper will discuss the causes and economic consequences of the tunneling behavior of the major shareholders of Yan ’an Bikang,and put forward suggestions based on the fundamental,which is of practical significance to curb the tunneling behavior of the major shareholders.This paper takes The listed company Yan ’an Bikang as the research object and the tunneling behavior of major shareholders as the research entry point to study the internal and external motivations of the tunneling behavior of major shareholders and its impact on the listed company,investors and capital market environment.Starting from the major shareholders’ embezzlement of listed companies’ funds by transferring non-operating funds through related party transactions and guaranteeing related parties,this paper analyzes the causes of the major shareholders’ infringement and finds that the main reasons for the hollowing of Yanan Bikang are as follows:(1)The major shareholder has the actual control of the listed company and the company’s senior executives have a close relationship with the major shareholder.As a result,no one can check and balance the behavior of the major shareholder and the major shareholder has the opportunity to empty the company;(2)The major shareholders transfer the funds of Yanan Bikang and empty the listed company under the excuse of carrying huge debts that cannot be repaid;(3)The punishment intensity of external supervision is far lower than the illegal earnings it hollowed out,and the loss of independence caused by the long continuous service time of intermediary agencies,so that the major shareholders have a fluke mentality and do not worry about the punishment of CSRC.After that,the paper analyzes the influence of the tunneling behavior of the major shareholders of Yanan Bikang and finds that(1)the occupation of the company’s funds by the major shareholders leads to the reduction of the cash ratio and debt expectation.Lack of adequate financial support,affecting the efficiency of resource allocation,the company’s net interest rate and net profit growth rate declined year by year;(2)The exposure of eviction leads to the decline of stock price and enterprise value,and the loss of investors’ interests in the capital market,which in turn leads to the decrease of investors’ trust in the market and is detrimental to the stable development of the market.This paper puts forward the following suggestions :(1)restrict the rights of major shareholders to nominate independent directors,restrict the relatives and friends of major shareholders to be members of the board of supervisors,reduce the control scope of major shareholders,and further exert the supervision functions of other directors and senior executives;(2)Strengthen the control of audit rotation system and enhance the independence of audit institutions;(3)For listed companies whose major shareholders have absolute control over related party transactions,the definition and disclosure scope of related party transactions should be expanded,and information transparency should be improved to facilitate supervision.It is hoped that this paper can provide some reference for the majority of investors and regulatory authorities through the analysis and study of the case of major shareholders hollowing out listed companies in Yan ’an Bikang,and have reference significance for curbing the behavior of major shareholders infringing on the interests of listed companies and hollowing out listed companies in the capital market.