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

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.iref.2014.02.004

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