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Media listed company's related party transactions and its impact on the value of the company

Author: ZhangJinHai ZhangYan From: www.yourpaper.net Posted: 2010-01-17 02:46:10 Read:
Abstract media listed companies in China are peeling, splitting, re-integration of the listing of its parent holding company, often through related party transactions of the the media listed company's financial and production and management decision-making exercise control or exercise significant influence, transactions are often not publicly unfair, unreasonable, is detrimental to the value of the company.
Keywords media associated with the listed company trading value of the company

The early 1990s, the media industry into the editorial and operational synergies new stage of the development, also, at this time, some of the media began operating assets stripping, the formation of the company and its joint-stock reform, issue stock, access to capital markets. Listed parent company of China's media are often able to the implementation of the the media listed company's financial and production and management decision-making control or significant influence over the transactions are often not public, unfair, unreasonable, affect the value of the company. Of related party transactions, a media listed companies hope to guide the establishment of a modern enterprise system, strengthen the associated transactions normative, from internal advantage of related party transactions, the two hope to the coercive power of the laws and regulations from the external monitor media listed companies the occurrence of non-fair related party transactions, to protect the interests of small shareholders. Maintaining the passion of minority shareholders of the media sector, and to improve the efficiency of the media listed companies to raise funds by issuing new shares, to enhance the value of the media listed companies.

First, the concept of related party transactions and related regulations

Related party transactions, as defined, should first have a ready understanding of what is associated enterprises. I believe that: associated enterprises with independent legal personality in two or more enterprises, enterprise groups based on the relationship forged; controlled entities have direct or indirect control over its subordinate enterprises based on the relationship. Enough to affect the independent will of subordinate enterprises and independent behavior. The associated trading is the behavior of the transactions between associated enterprises or associated person. Media related party transactions of listed companies is the media listed companies association between the (associated enterprises) transactions. Can save, so you can ensure the realization of the contract due to the transaction can be completed by means of the associated internal 'control and dominant force to find market price search costs, information costs, negotiating costs and contract implementation monitoring costs, etc., which can reduce transaction costs, which is a positive side; However, in a market economy, all transactions should be conditional on the competition in the market, this is a gurantee an important prerequisite for fairness is a basic principle, apparently, related party transactions may deviate from this principles. Trading results, if not to the rights or interests of the relevant interests infringed, a legitimate related party transactions and should not be prohibited by law. Usually when the listed companies in transactions with related parties asked if its trading conditions is significantly higher or lower than usual trading conditions between the two independent companies, and the rights and interests of the Company and its shareholders damage, it should be recognized as improper related party transactions.
"Shanghai Stock Exchange Listing Rules (revised 2006) and the Shenzhen Stock Exchange Listing Rules (revised in 2006), the definition of related party transactions of the Company will be listed as a listed company or a subsidiary of the listed companies association transfer of resources or obligations between the occurrence of matters. Associated and related transactions and identified according to the principle of substance over form. 2006 Edition Enterprise Accounting Standards No. 36, Chapter 7: related party transactions, the behavior of transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Law of the People's Republic of China "(the new company law will go into effect January 1, 2006) for the first time explicitly in the form of law related party relationships.

Media listed companies inevitability of related party transactions and the value of the company's impact

The China Securities Regulatory Commission to encourage the enterprises to be reorganized to reduce the associated transactions, but from the perspective of the media business practice, media corporate divestitures, its specificity must be part of the restructuring after listing. Its particularity is reflected in the following aspects: First, asset class and channel resources of TV news, newspaper editing class assets are due to policy restrictions can not be listed; media companies tend to have a large number of hotels, conference centers, tourism with The main industry has little the secondary business assets; media enterprises typically have assets commitment to social welfare functions; fourth, media companies also usually have a large number of lots allocated land and property. Invested AG will face high revaluation, a serious drag on the future performance of the stock company. The part is designed media enterprise quality assets and converted into a stock company listed group of companies consisting of the remaining assets after the reform has become the controlling shareholder of the listed company, therefore, will inevitably lead to a large number of related party transactions.
Related party transactions of the value of the company there are two opposing viewpoints: a conflict of interest theory and effective trading theory. The theory of conflict of interest that related party transactions so that large shareholders or management control over behavior is difficult to obtain regulatory weak corporate governance mechanism, the related party transactions will be widespread, the rate of return of the stock will be lower. Will damage the interests of small shareholders, reduce the enterprise value. The effective transaction theory that reduce the search of the transaction and compliance costs associated with the transaction. Reduce transaction risks, can effectively meet the basic economic needs of the company, can improve enterprise value. But since the 1990s, the prevalence of ownership concentration and major shareholder of the dominant phenomenon around the world, related party transactions, one party often has control or significant influence, contrary to the compensation for equal commercial terms and it fairness manipulation, the controlling shareholder of related party transactions often fictitious profits and divert resources from the listed companies. To the detriment of the enterprise value of the listed companies.

Three main types of media transactions of public companies

View of the the media listed company's related party transactions occurred between its parent holding company, the main basis for the parent company of the media listed companies is the use of "grabbing hand" or "supporting hand" related party transactions are divided into two categories:

1 the deprivation of the parent company of the listed company trading
The parent company of deprivation transactions of listed companies, also known as "blood" type transactions. Media listed companies are peeled off from the parent company's quality operating assets, market prospects, strong external financing capacity, often as the parent company's external financing window. Ho Hua Zhang, president and editor-in-chief of the Chengdu Business Daily, said "the listed companies should Newspaper Group's bank." To the external market into more funds, then part of the funds beyond their own needs through internal capital market intermediation other members of the parent company and the Group, this excessive financing of listed companies is clearly not. If excessive financing using debt financing, increasing the proportion of the corporate debt (liabilities / equity, and deterioration of the financial condition of the enterprise. Parent or other group companies can not repay the liabilities of the listed companies, The listed companies will be faced with the pressure of foreign debt service, and therefore bear the risk of other members of the company's debt. foreign excessive financing is equity financing will dilute the equity of shareholders of listed companies, and integration into the funds transferred by the cheap to the parent company and other members of the company, the claims did not result in the offering of high-yield, this is bound to cause damage to the overall value of the listed companies the target deviation listed company and the parent holding (listed companies want to be thriving, while parent company of "Hello, everybody is really good, so the total would like Robin Hood), so when the excellent performance of listed companies, the advantage of the parent company by virtue of control over the use of related party transactions misappropriation, embezzlement of assets of listed companies, from listed companies "blood".
The controlling shareholder Dianguangchuanmei Hunan Radio and Television Industry Center, as AG Dianguangzhuanmei actually industrial center in order to be listed "shell", is the industrial center of the window on the pocketbook in the stock market. Hunan Radio and Television Industry Center, directly or indirectly, in the investment and construction process takes Being Paid a lot of money. Paid by 1999, and starting in 2000, and the issuance of raising a total capital of 2.049 billion yuan, but Dianguangzhuanmei is "affluent poor", borrowing heavily in order to maintain their operations. Dianguangzhuanmei 2004 mid-year report shows, Dianguangzhuanmei through bank loans more than 21 billion yuan, 1.15 billion yuan of short-term loans (including long-term loans due within one year), long-term loan of 950 million yuan cash on the company account for 8.4 billion. And analysis in the annual report of 2004, according to company profitability declined, cash impaired. And asset-liability management capabilities in the industry in the downstream, heavy debt, debt structure is irrational; overall financial position is not satisfactory. But the company's 2005 annual report shows that "the end of the reporting period, the company funds raised last cumulative use of 129,066 yuan, the company has not used funds raised last 25,256 yuan deposited in the company account. Dianguangzhuanmei Since stages sexual idle funds raised, why significant amounts of short-term loans held by it? only one possible explanation: In the case of idle funds raised, the loan is used to someone else (the parent holding company and its subsidiaries). Related party transactions of listed companies profit packaging type
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