Study of large shareholders’ behavior after non-tradable shares reform: A perspective of related party transactions
Abstract: This paper explores
the behavior choice of large shareholders in the related party transactions
which occur between the large shareholders and listed companies by using the
data of shares from 2007 to 2010.
Design/methodology/appraoch: Based on the classical research paradigm
(that is, LLSV), we analysis controlling shareholders’ propping and tunneling
behaviors aiming to make sure their impacts to the medium and small
shareholders in theory.
Findings: We get the following findings: After our capital market
entering the era of full circulation, we find that the relationship between the
ratio of controlling shareholders and the related party transactions present
(RPTs) an inverted “U” shape curve, which means that it exits a typical
“Grab-synergy” effect. we should take different measures to the transactions
occurred between the large shareholders and listed companies according to the
property nature of the large shareholders. State-owned shareholders choose to realize
their private benefits by means of RPTs, while the non state-owned shareholders
conduct RPTs with an expectation of reducing costs.
Practical implications: Since Guo Shuqing, the Chairman of China
Securities Regulatory Commission, took office, he has taken a lot measures to
curb the related party transactions harshly. Under this circumstance, it is
just the right time to have a research on large shareholders’ behavior. It has
important significance both in theory and practice.
Originality/value: Considering the Chinese special national conditions,
this paper added lots of comprehensive facts to study large shareholders’
behavior including the rate of the share held by indirect controller, the
probability of thievish behaviors have been discovered, and the strict
punishment regulations. The discussions in this paper help to bring into focus
a highly topical issue within the context of the large shareholders’ behavior
after Non-tradable Shares Reform.
Keywords: related party
transactions (RPTs), separation factor, equity restriction, non-tradable shares
reform
Author: Hongbo Zhang, Qing Xia
Journal Code: jptindustrigg130086
