Tunneling Through Intercorporate Loans Damages Company Value
Stanford GSB News
Majority shareholders who divert assets from one company to another for personal benefit can be found in some developing nations, robbing companies of value and even forcing them to be delisted from stock exchanges. Business school professor Charles M.C. Lee and his coauthors documented the damage in a study of Chinese companies.
December 2010 STANFORD GRADUATE SCHOOL OF BUSINESS—What happens when a company is robbed by its dominant shareholder? The theft not only hurts minority shareholders, but profoundly damages the firm’s longer-term health and viability, according to Charles M.C. Lee, an accounting professor at Stanford’s Graduate School of Business. In a recent research paper, Lee and two Peking University scholars examined such insider abuse in an increasingly important market: China…..