Publication Type
Journal Article
Version
acceptedVersion
Publication Date
5-2014
Abstract
China's listed companies often exchange corporate assets with their parent companies. We find that listed companies that have been incompletely restructured from former state-owned enterprises and in sound financial condition tend to exchange higher quality assets for lower quality assets (i.e., tunneling). However, when there is a need to avoid reporting a loss and to raise additional capital, listed companies tend to exchange lower quality assets for higher quality assets (i.e., propping). We also find that the market reacts indifferently to asset exchange announcements. Finally, we find asset exchanges motivated by a tunneling (propping) incentive to be associated with poorer (improved) post-exchange stock performance and financial performance. In summary, this study contributes to the corporate asset literature by providing two new incentives: tunneling and propping.
Keywords
Assets exchange, Tunneling, Propping, China
Discipline
Accounting | Asian Studies | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Publication
International Review of Economics and Finance
Volume
31
First Page
205
Last Page
217
ISSN
1059-0560
Identifier
10.1016/j.iref.2014.02.004
Publisher
Elsevier
Citation
LOU, Fang; WANG, Jiwei; and YUAN, Hongqi.
Causes and consequences of corporate asset exchanges by listed companies in China. (2014). International Review of Economics and Finance. 31, 205-217.
Available at: https://ink.library.smu.edu.sg/soa_research/897
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.iref.2014.02.004
Included in
Accounting Commons, Asian Studies Commons, Corporate Finance Commons