TY - JOUR
T1 - Tunneling and propping up
T2 - An analysis of related party transactions by Chinese listed companies
AU - Cheung, Stephen Y L
AU - Jing, Lihua
AU - Lu, Tong
AU - Rau, P. Raghavendra
AU - Stouraitis, Aristotelis
N1 - Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2009/6
Y1 - 2009/6
N2 - We examine a sample of related party transactions between Chinese publicly listed firms and their controlling shareholders during 2001-2002. Minority shareholders in these firms seem to be subject to expropriation through tunneling but also gain from propping up. On balance, there seems to be more tunneling than propping up. Both types of firms have larger state ownership compared to the rest of the Chinese market but firms that are propped up are larger and have larger state ownership than firms subject to tunneling. Propped up firms are more likely to have foreign shareholders and to be cross-listed abroad compared to firms that are subject to tunneling. Propped up firms also tend to have worse operating performance in the fiscal year preceding the announcement of the related party transaction. Finally, we find that related party transactions representing tunneling are accompanied by significantly less information disclosure compared to related party transactions representing propping.
AB - We examine a sample of related party transactions between Chinese publicly listed firms and their controlling shareholders during 2001-2002. Minority shareholders in these firms seem to be subject to expropriation through tunneling but also gain from propping up. On balance, there seems to be more tunneling than propping up. Both types of firms have larger state ownership compared to the rest of the Chinese market but firms that are propped up are larger and have larger state ownership than firms subject to tunneling. Propped up firms are more likely to have foreign shareholders and to be cross-listed abroad compared to firms that are subject to tunneling. Propped up firms also tend to have worse operating performance in the fiscal year preceding the announcement of the related party transaction. Finally, we find that related party transactions representing tunneling are accompanied by significantly less information disclosure compared to related party transactions representing propping.
KW - China
KW - International corporate governance
KW - Propping
KW - Related party transactions
KW - Tunneling
UR - http://www.scopus.com/inward/record.url?scp=62149094362&partnerID=8YFLogxK
U2 - 10.1016/j.pacfin.2008.10.001
DO - 10.1016/j.pacfin.2008.10.001
M3 - Journal article
AN - SCOPUS:62149094362
SN - 0927-538X
VL - 17
SP - 372
EP - 393
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
IS - 3
ER -