CHAPTER ONE Introduction 1
1.1 Overview and Objectives 1
1.2 Research Questions 7
1.3 Significance of the Study 8
1.4 Organisation of the Study 10
CHAPTER TWO Theory Review 11
2.1 Introduction 11
2.2 Dispersed Ownership and Agency Conflict 12
2.3 Concentrated Ownership and Theories for Ownership Discrepancy 14
2.4 Advantages and Disadvantages of Concentrated Ownership 20
2.5 Private Benefits of Control 26
2.5.1 What Are Private Benefits of Control? 26
2.5.2 Defence of Private Benefits of Control 27
2.6 Group Affiliation and Internal Markets 28
2.7 Summary 31
CHAPTER THREE Institutional Background 32
3.1 Introduction 32
3.2 Reform of SOEs and Share Issue Privatisation 33
3.3 State Ownership and Agency Conflict 35
3.4 Equity Division(Share Split Structure) 36
3.5 Legal and Institutional Infrastructure 38
3.6 Listing Quota and RPTs 40
3.7 Summary 42
CHAPTER FOUR Literature Review 44
4.1 Introduction 44
4.2 Definitions of Tunnelling and Propping 45
4.3 Consequences of Tunnelling and Propping 47
4.3.1 Consequences of Tunnelling 47
4.3.2 Consequences of Propping 50
4.4 Studies on Tunnelling 51
4.5 Summary 58
CHAPTER FIVE Hypotheses Development 60
5.1 Introduction 60
5.2 Tunnelling Hypotheses 60
5.3 Propping Hypothesis 69
5.4 Value Effects of Tunnelling and Propping 71
5.5 Summary 73
CHAPTER SIX Research Design and Methodology 74
6.1 Introduction 74
6.2 Sample Selection 74
6.3 Variable Definition 76
6.3.1 Definition of RPTs 76
6.3.2 Definitions of Control Rights,Controlling Shareholder,Ownership Type and Pyramid 79
6.3.3 Definition of Other Blockholders 83
6.3.4 Definition of Investment Opportunity 84
6.3.5 Definition of Firms in Financial Distress 84
6.3.6 Definition of Firm Performance 85
6.3.7 Measurement of Control Variables 86
6.4 Empirical Models 89
6.5 Summary 90
CHAPTER SEVEN Results and Discussion 91
7.1 Introduction 91
7.2 Descriptive Statistics 91
7.3 Test of Regression Assumptions 100
7.4 Regression Results and Discussion 103
7.4.1 Evidence of Tunnelling and Propping 103
7.4.2 Effect of Tunnelling and Propping on Operating Performance 111
7.4.3 Effect of Tunnelling and Propping on Firm Valuation 114
7.5 Robustness Test 118
7.5.1 Control Rights Threshold 118
7.5.2 Relationship between Tunnelling,Propping and ST 120
7.5.3 Endogeneity of Ownership,Tunnelling and Propping Variables 125
7.6 Limitations 129
7.7 Summary 130
CHAPTER EIGHT Conclusions and Policy Implications 132
8.1 Conclusions 132
8.2 Implications of Findings 134
8.3 Avenues for Future Research 136
References 139
Appendix 1 A Typical State Owned Pyramidal Structure in China 150
Appendix 2 A Typical Private Controlled Pyramidal Structure in China 151