Tunneling and propping up: An analysis of related party transactions by Chinese listed companies

Cheung, Yan‐Leung; Jing, Lihua; Lu, Tong; Rau, P. Raghavendra; Stouraitis, Aris

doi:10.1016/j.pacfin.2008.10.001

Cited by 284 publications

(286 citation statements)

References 36 publications

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“…The results indicate that related-party transactions enjoy a more positive CSR effect on long-term M&A performance than those with non-related party transactions. Our findings are contradicted by some studies, which concluded CSR leads to a "Resource Hollowing" effect [9,[51][52][53][54]. However, our findings are consistent with studies which concluded CSR brings about an "Efficiency Enhancing" effect [11][12][13].…”

Section: Effects Of Related-party Transactions On Csr-performance Linsupporting

confidence: 50%

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Corporate Social Responsibility and the Long-Term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?

Qiao

2018

Sustainability

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This study investigates the effects of geographical regions and related-party transactions on corporate social responsibility (CSR) and long-term mergers and acquisitions (M&A) performance linkage. We conduct a Heckman two-stage model analysis, using data from listed firms in the Shanghai and Shenzhen stock exchange markets in China. The results indicate that: (1) buyers' CSR performance has a significant and positive effect on long-term M&A performance. (2) Significant differences exist across geographical regions in the links between CSR and long-term M&A performance. In our study, the effects of CSR on long-term M&A performance were positive and significant in a sub-sample of firms located in the eastern region, but the effects were negative and insignificant in a sub-sample of firms located in regions other than in the east. (3) Related-party M&A transactions experience more positive and significant CSR long-term M&A performance linkage, compared to non-related party M&A transactions. Our findings might provide more robust evidence to CSR performance linkage, as we have examined the linkage in a special context of M&A activities, using a Heckman two-stage model to alleviate endogeneity bias. We also bring further insights into the effects of two contingent factors (geographical regions and related-party transactions) on the CSR-performance linkage. The findings of this article suggest that it is reasonable for firms to act socially responsibly when generating economic benefits. Policy makers should consider how to encourage firms to better fulfill CSR through improving the market environment and by enhancing their levels of supervision.

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Section: Effects Of Related-party Transactions On Csr-performance Linsupporting

confidence: 50%

“…Significant evidence exists to show that controlling shareholders are more likely to tunnel through related-party transactions than to prop up a firm [51][52][53]. With respect to M&A activities, there are also negative effects of related-party transactions.…”

Section: Csr Related-party Transactions and Long-term Manda Performancementioning

confidence: 99%

Corporate Social Responsibility and the Long-Term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?

Qiao

2018

Sustainability

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“…(iii) Cash payments, including loans, cash payments or provision of cash guarantees by the listed firm to its controlling shareholders in the pyramids (Cheung et al 2008). …”

Section: Event Study Analysis: Rpts and Insider Controlmentioning

confidence: 99%

The Emergence and Evolution of Chinese Business Groups: Are Pyramidal Groups Forming?

Sutherland¹,

Ning²

2015

State Capitalism, Institutional Adaptation, and the Chinese Miracle

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Additional information: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details.

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“…By deriving data from filings of connected transactions, [18] and [19] are able to classify connected transactions into three categories: a) transactions that are a priori to result in expropriation (asset acquisitions, asset sales, equity sales, and trading relationships and cash payments), b) transactions that are likely benefit the listed firms (cash receipts and subsidiary relationships), and c) transactions that may have been driven by strategic rationales (takeover offers and joint ventures, joint venture stake acquisitions and sales). Reference [19] further categorizes these transactions into tunneling or propping activities. They find that there are more tunneling than propping in their sample of filings by Chinese listed companies.…”

Section: The Importance Of Rpts Disclosuresmentioning

confidence: 99%

“…Different types of RPTs require different level of disclosures, especially when the disclosure is associated with different underlying incentives and has differential effect on the firm. As discussed above, [19] which categorize RPTs into tunneling or propping activities indicate that disclosure of information differs between those two types of transactions. They suggest that manipulation of information disclosure may be used by controlling shareholders to conceal expropriation.…”

Section: Issues On Rpts Disclosurementioning

confidence: 99%

The Breadth and Depth of Related Party Transactions Disclosures

Ariff¹,

Hashim²

2013

IJTEF

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Abstract-This paper reviews the existing requirement on related party transactions (RPTs) disclosure in the Malaysian context and discusses issues surrounding such disclosure. As there are two conflicting effects of RPTs, sufficient information should be made available to assist investors in analyzing the risk and return of RPTs. We review prior studies and highlight issues of information disclosure related to RPTs, such as the variations in the level of RPTs disclosure. We propose future research on RPTs to apply content analysis using a voluntary disclosure index to understand more about the breadth and depth of the RPTs information.

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Tunneling and propping up: An analysis of related party transactions by Chinese listed companies

Cited by 284 publications

References 36 publications

Corporate Social Responsibility and the Long-Term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?

Corporate Social Responsibility and the Long-Term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?

The Emergence and Evolution of Chinese Business Groups: Are Pyramidal Groups Forming?

The Breadth and Depth of Related Party Transactions Disclosures

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