2002 11 10384 9915064 UDC Money Trapping By the Listed Companies and Its Prevention MBA 2002 11 2002 12 2002
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Abstract In the first place, this paper defines the conduct of some listed companies which takes the course of going public as an opportunity to attract capital from atomic investors and the harmfulness of this conduct. A number of the listed companies yearn for money so badly that they would cheat in getting the IPO qualification, either by over window dressing or by inappropriate lobbying. Having gone public, these companies would stretch their hands even further into the pockets of the investors by issuing more shares even when they do not actually need so much money. The inappropriately drawn money is used inappropriately, in some case being entrusted to unjustifiable investments or being seized unlawfully by the majority shareholder. This conduct has become one of the causes of China's stock market's low efficiency in allocation resources. It has also produced negative effects in not only the formation of the effective corporate governance but also the growth of the economy. Next this paper elaborates the causes behind this irrational behavior. First, as a result of the halfway introduction of the stock-holding system, majority shareholder and "insider control" are common. Some of the listed company are just the profitable tools of these majority shareholders and insiders. Secondly, the P/E ratio in China's stock market is irrationally high, thanks partly to the unstated assurance from the market surveillant. And the stipulation of the related laws and regulations falls far behind the development of the market. Both help produce an favorable condition for companies to cheat money purposely by getting listed. The last part of this paper puts forward the preventive measure against the money-trap. Aiming at solving the problem from the root, it is advised that the share structure of the companies be restructured. To eliminate the asymmetry of interests between the majority shareholders and the minor shareholders and the "insider control", the problem of the state shares' being not able to circulate and their dominant position in the companies shall be dealt with. The government shall quit its un-stated assurance for high stock prices and to allow them to fall back to the reasonable level. It is also advised that reasonable stricter financial supervision and rigorous information declaration requirements be implemented so as to decrease fraud and window dressing. At the same time, the development of the bond market shall be encouraged so as to provide an alternative way of financing for the companies. Key words: listed company; money trapping; corporate governance. - 3 -
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45% 41.7% 38.2% 35.2% 1999 2001 6.99 1.16 5 100 70 5 2002 8 23 6 7 2002 4 8 2001 10 14 9-6 -
2001 11 2002 3 70 70 290.4 4.09 9 10 2000 25.8 2001 2001 5 31 25 2001 12 31 12.67 16.9 12.6 12.6 13.9 70 45.9 6 10 11 71 2002 3 22-7 -
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