Abstract

Scholars find that concentrated corporate ownership is common among most of the countries in the world. On the one hand, concentrated corporate ownership in some degree is an effective means to decrease agency cost, but on the other hand, making use of the control advantage, it's likely for controlling shareholder to appropriate the property of company through related transactions and directional add-issuance. In a typical emerging and transitional economy, Chinese companies' ownership structure is very concentrated, with the characteristic of“the biggest holder dominance”, and the agency problem between shareholders and managers is severe; at the same time, because of the imperfection of legal system and its low execution efficiency, there lacks of an effective way to constrict tunneling of controlling shareholders so that controlling shareholders have strong incentive and opportunity to carry out the action of tunneling. Tunneling seriously infringes the interest of investors and prejudice the healthy development of companies and capital market, so how to reduce the occurrence of tunneling has always been a hot issue of research. Scholars study the factors that constrain the tunneling of controlling shareholders from many perspective（balance of ownership structure, ratio of independent director, auditor oversight and so on）. However, the problem of tunneling haven't been solved, with in-depth study，scholars found that media plays a positive role in corporate governance. Meanwhile, corporate governance has become a socialization problem, so not only company's internal supervision mechanism, but also the supervision form society should be considered when improve corporate governance. As a society supervision mechanism, media has become an important factor that influence corporate behavior and improve corporate governance. Deep analysis of the relationship of negative media coverage and tunneling of controlling shareholders is helpful for us to understand the function of media in corporate governance, reduce tunneling, protect the interest of investor and perfect the corporate governance.

This paper analyzes the influence of media coverage on tunneling of controlling shareholders with the sample of 2010—2012 Chinese listed companies. This paper first study the influence of negative media coverage on tunneling of controlling shareholders when doing empirical analysis. Then whether reputation mechanism exists in Chinese listed family companies is verified, and managers'characteristics is classified into three types, including the controlling shareholder himself or his relatives, professional manager and managers growing up with company, and separate analyses were carried out on the effect of negative media coverage on tunneling in companies with the three kind of manager. At last, this paper analyzes if the influence of negative media coverage on tunneling changes as the legal system changes. To ensure the effectiveness and robustness of results, two methods, namely“the number of negative media coverage”and“the ratio of the number of negative media coverage to total media coverage”are used as the measurement of negative media coverage, and meanwhile“ratio of the difference between the receivables and payables in related-party transaction to total assets”and“change of the ratio”are used to measure tunneling. The main results of re search are as follows：

（1）After negative media coverage, the tunneling of controlling shareholders decreases; compared with state-owned listed companies, negative media coverage have a greater effect on tunneling in non-state owned listed companies. Further research indicates that the decrease of tunneling can promote the increase of corporate performance and the decrease of the degree of earnings management.

（2）Negative media coverage can effectively decrease tunneling in listed family companies when the manager is a professional manager or is the kind of manager that growing up with company, and negative media coverage have a weaker effect on tunneling when the manager is the controlling shareholder himself or his relatives. Further researches find that compared with companies whose manager grows up with company, negative media coverage have a greater effect on tunneling in companies with professional manager; compared with companies whose manager is the controlling shareholder himself or his relatives, negative media coverage have a greater effect on tunneling in companies with professional manager.

（3）Negative media coverage can significantly influence tunneling easier in areas with good legal environment; nevertheless it has little influence on tunneling in areas with bad legal environment. The influence of negative media coverage on tunneling in companies with different type of manager is different as legal environment changes.

The research results show that media has the function of corporate governance, promote the imperfection of corporate governance, and improve the level of investor protection. In the meanwhile, the research results have important theoretical and practical significance on fully understanding the governance effects and economic results of media for the government and related departments, also the results not only is helpful to realize the positive role of media in corporate governance, but also provide direct empirical evidence for constraining tunneling and protecting investors.

Key words: Negative Media Coverage; Controlling Shareholder; Tunneling; Legal Environment; Professional Manager