Tunneling, Propping and M&A: Evidence from Chinese Listed Companies
Li Zengquan (Institute of Accounting and Finance, Shanghai University of Finance and Economics) Yu Qian (School of Business, Renmin University of China) Wang Xiaokun (School of Economics and Finance, The University of Hong Kong)
Basing the sample of 416 events in which listed companies merge or acquire non-listed companies in China stock market from 1998 to 2001, this article investigates the effects of tunneling or propping motives of controlling shareholders and local government to the long-term performance of listed companies. The result suggests that the MAs driven by motives of avoiding deficit or rationing shares can enhance the companies' accounting performance in short term. On the other hand, when companies have not such motives, the MAs are basically tunneling activities that will damage the companies' value but have no significant influences to their accounting performance.