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The status of research related party transactions of listed companies in China

Author: WangJing From: www.yourpaper.net Posted: 2009-12-08 22:59:14 Read:
v [Abstract] With the rapid development of the securities market, related party transactions have become a common phenomenon in China's listed companies, at the same time it is also the world the development of a common problem. Basis on the course of development of the related party transactions of listed companies in China, discussed the status of related party transactions of listed companies in China.
[Keywords] transactions of public companies development process of the status quo

Promulgated in February 2006, 15 in the New Accounting Standards for Business Enterprises No. 36 - Related Party Disclosures "related party transaction means the transfer of resources, services, or obligations of behavior between related parties, regardless of whether a price is charged. And the Shanghai Stock Exchange Listing Rules "and" Shenzhen Stock Exchange Listing Rules provides that related party transactions of listed companies is the matter of the transfer of resources or obligations between the listed company and its controlled subsidiaries and related parties. The substance of the transaction between related parties make benefit all parties involved in the transaction, that allows transactions between two or more parties obtain the benefits (Liu Rui, 2006). Related party transactions not only has a positive role to reduce transaction costs, reasonable tax avoidance, to promote the company's scale of operations, and overall strategy; there are also the transfer of funds to manipulate profits whitewash performance to evade tax, and many other negative impact. Therefore, the related party transactions is a double-edged sword. China's listed companies, the widespread abuse of related party transactions, and thereby seriously prejudice the interests of medium and small shareholders and creditors.

One, the course of development of the related party transactions of listed companies in China

Background from the international point of view, the related party transactions with the evolution of the worldwide company form of organization and governance structure, widely used in multinational companies, parent companies and subsidiaries made total branch system. In Western countries, the multinational group of companies often use the related party transactions transfer in high-tax jurisdictions with low tax jurisdictions between income and expenses, in order to achieve a reasonable tax avoidance purposes. In some family businesses in Asia and the government-run enterprises, the related party transactions between parent and subsidiary are used as transfer profits or cover up losses.
In the form from the domestic point of view, since the founding of the Shanghai and Shenzhen Stock Exchange in 1990, the related party transactions become widespread in China's securities market and need standardized trading behavior. Most of the listed companies in China are state-owned enterprises from the restructuring, the original are saddled with huge and heavy burden of social services. In 1993, the majority of our listed companies listed in the overall listing, this listed listed companies memory in a large number of non-operating assets and non-performing assets, at the same time lead to the return on assets is too low, severely restricting the ability of enterprise efficiency play, after the listing of two to three years, many companies appear the profit landslide even loss situation. In 1994, the securities regulatory authorities began to make allotment conditions of listed companies must last three consecutive years earnings and ROE 3-year average in more than 10% of the requirements, coupled by the IPO quota restrictions, making the most of the company choose from after 1994, the "principal market, the original enterprise transformation for the parent company" mode, in the restructuring of non-performing assets stripped, or allocated out of the listing of the best assets in the enterprise. This listing so that the group of companies to become the controlling shareholder of the listed company, such listed companies formed a close relationship with the parent company, so related transactions along with large numbers. The heat of formation of asset restructuring since 1997, the related party transactions to derive new functionality, played a more important role in the operation and performance of the listed companies. According to statistics, the proportion of related party transactions of listed companies in 1997 and 1998, respectively, 84.6%, 80%. This phenomenon has continued ever since. Seen, the related party transactions in the operating activities of China's listed companies is very common.

Second, the status of related party transactions of listed companies in China

1 transactions of public companies frequently
Mainly in: (1) The listed companies sell their products to related parties, labor or other services associated with the formation of sales transactions become an important source of income of the listed company's main business. (2) of listed companies to purchase raw materials from related parties, formed to provide services and other services associated with the direction of listed companies associated purchase transaction constitutes an important part of the listed company's main business cost.
Related party transactions mainstream equity investments and equity transfer
Statistics on related party transactions in 2005, it can be seen that the listed company is keen to make an equity investment. The comparative equity investment equity transfer average per transaction amount, can be found listed company equity transfer amount is less than the amount of equity investment transactions, should be considered in the listed company equity acquisitions and equity transfer is the transfer of the company's net asset position, Therefore it can be concluded, the equity investment of the listed companies was generally more blind, poor income, leading to the equity transfer price had to be greatly reduced. Related party transactions of listed companies in China forms
The specific form of: (1) asset transactions. Both individual physical assets trading, options and options trading, mergers and acquisitions also include the entire enterprise. (2) the financing of listed companies to provide funds to a related party, or associated with the direction of listed companies to provide funds. (3) associated guarantees. (4) The related party transactions of non-associated and deliberately conceal or hide the relationship. Related party transactions of listed companies in China in recent years, showed the following trends: (mainly associated with procurement and sales) sharp increase in the total daily transactions associated; relatively small increase in total non-routine related party transactions; associated guarantees abnormal growth.
Capital flows not
2005 all associated transactions according to their capital flows to divide, and 112.9 billion yuan of capital outflows the inflow related parties listed companies, only 425 billion yuan into the listed company. From this it can be seen that the listed company and its related parties seriously wrong on capital flows, related party occupation of the capital of listed companies usually are wrapped in the cloak of fair trade, more subtle manner.
5. Funds by related parties generally
Under normal circumstances, the business of buying and selling of listed companies and related parties, the end of the period corresponding there will be a certain amount of clearing balances between the models. If the listed companies exchange settlement balances at the end of the aging time is not very long, and the business and the current basic adaptation, it indicates that the company's financial position is basically normal. But in fact, occupied by the related parties listed company funding history for a long time and the amount and affect the efficiency of the use of funds of listed companies.
Industry characteristics significantly
From the industry perspective, mining and quarrying, construction, manufacturing daily related party transactions is significantly higher than other industries. In these industries, especially in the mining industry is a capital-intensive enterprise, due to the restrictions of the listed amount, split listed companies led the day-to-day class-related transactions larger. Analysis from the funds used, the manufacturing sector is significantly higher than other industries, this description of the manufacturing industry in addition to industry factors also exist to provide additional financial support to the shareholders.
7. Associated transaction structure optimization functions show
Listed companies, there are some companies with the means of related party transactions, the smooth realization of industrial transformation. There are high-quality assets of the enterprise acquisition related parties, the scale of operation and the competitiveness of the company's existing main business has been further strengthened, and the company has brought a new profit growth point. In addition there are a number of companies through related party transactions, non-performing assets disposal, the corporate industrial chain integrity improve the profitability of the assets has also been enhanced.
8 associated with the transaction earnings management
Earnings management with profit to manipulate the most essential difference is that earnings management is to use legal means to achieve the required level of profits, profit manipulation is the use of illegal means to achieve such allotment, insurance cards and other purposes. Management of operations at the end of the accounting period increased pressure to achieve market expectations that the decline in operating results, earnings management took advantage of the related party transactions. The performance of the equity transfer, asset restructuring, sale of assets, related party transactions is more close to the end of the accounting period.
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