Family-controlled Corporate Governance and Tunneling by the Major Shareholders:A Case Study of Hongsheng Technology Co.,Ltd.

This paper uses the case study method to investigate the process of how Hongsheng Technology Co.,Ltd.,a family-controlled listed company formed by the reverse acquisition of state-owned shares,was tunneled by its major shareholder the Longs'.The research indicates that the family-controlled listed companies have both motivations and conditions to tunnel the listed companies when the separation of the two rights is abnormally high,the ownership is absent of restrictions,and the investor protection system is not perfect.This paper advises that tunneling should be supervised and held back to protect the interests of the minority investors and keep the capital market's order by establishing a creditor governance mechanism and enhancing risk control in financial institutions.