Theoretical Analysis and Empirical Test to Check-and-balance Ownership Structure,Tunneling and Corporate value

How the equity structure affects tunneling and corporate value is one of hot topics at present. Based on the assumption that tunneling is restricted by law,other large shareholders' counterbalance and costs,we set up a model refer to LLSV(2002)and the actual condition of China.The model shows: (1)the tunneling by the first large shareholder has reversed U shape relationship with other large shareholder's counterbalance.(2)The value of corporate whose resources are diverted has U shape relationship with other large shareholder's counterbalance.(3)The more the difference between voting right and cash flow right,the more the ultimate owners want to divert.We made empirical test using 168 acquisitions in Chinese stock market between 1998 and 2003.The results are consistent with the model.The first large shareholder holding majority shares or other large shareholders having strong counterbalance is more favorable to the corporate value.The equity structure of majority shareholders or multiple large shareholders, maybe is more effective than widely dispersed equity structure.