Study on the Relationship of Financial Reporting Transparency, External Factors and Tunneling
|School||Zhejiang University of Technology|
|Keywords||Financial reporting transparency Auditing Degree of marketing Tunneling|
Most companies in the world is relatively concentrated in equity rather thandecentralized (LaPorta et al.,1999), in this case, the agency problem occurs mainlybetween the large shareholders and minority shareholders. Tangzong Ming and Jiangwei further found that the extent of exploition on minority shareholders in china ismuch higher than Anglo-American, whose main way of occupation is dirctlytunneling (Peng&Zhou Lian,2006). For a long time, the controlling shareholdersplunder listed companies and obtain private benefits by tunneling, which not onlyharm the interests of other shareholders, but also seriously affect the normal operationof listed companies, resulting in a shortage of funds and declined in profitability evenleading companies to bankruption. Most scholars of the past study "tunnelingbehavior based on the perspective of investor protection, which is partial tounderstand the behavior of encroachment, never thought about certain substitutioneffect between these measures, which may be not optimization in consideration ofcost.Based on the past research, this paper firstly study the relationship betweenfinancial reporting transparency and largest shareholder’ tunneling based on the dataof companies in Shenzhen Stock Exchange from year2008to year2012, thenconsider the influence of external factor on this relationship. For different qualityempirical audit sample, financial reporting transparency will different on tunneling; sosame to the different markets. The results show that improving financial reportingtransparency helps to inhibit the large shareholders expropriation. However, thisconclusion is only proved in firm as non-big four, in the high audit quality samples,the conclusion is not proved. It shows that the influence of high audit quality samples,financial reporting transparency on agency cost is reduced, and for low audit qualitysamples, on the contrary, the effect of financial reporting transparency on curbingtunneling will strengthen when the degree of market is low.In the latter part of this study, we focus on the interaction effects of audit qualityand tunneling. We subdivided the type of change in accounting firms, the study found when companies change the bige auditing firm to the samall, the number of tunnelingincreased in the amount. But on the contrary when transfering from samll to big, thesituation of tunneling is still not improved as we suspected. Finally, we found thatmore serious funds occupied by companies, less incentive to select more high qualityaudit firms.