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Wen Guang Xu

DBA Graduate - 2015

Thesis title

Impact of the Financial Crisis and Internal Capital Market of Group — From the Perspective of Tunneling and Propping

Supervisor(s)

Minghai Wei

Dr. Wen Guang Xu obtained a Doctorate of Business Administration from Grenoble Ecole de Management in 2015. He is the vice general manager of the South China branch of China GCI in Guangzhou, and has 20 years of experience in the communication industry.

The global financial crisis in 2008 triggered by the sub-prime debt of the USA has been the most severe financial crisis to the whole world since the Great Depression in the 1930s. Such crisis has not only impacted greatly the real economy and the financial market of the world but also influenced the thinking of human on the economic development in the past decades. As the second industrial revolution swept over the world, the economic development modes of the world headed for diversification. In the 1950s, a new business mode, group enterprise, gradually became the new direction of development of large businesses. The internal capital market of group, as the new organization created by group enterprise itself, plays a crucial role in mitigating the low efficiency of the external capital market. Therefore, such financial crisis, in addition to the impact on the macro and microeconomic environment, will surely affect the operation of the internal capital market of group. This dissertation, in the context of the global financial crisis in 2008, discusses its impact on the macro economy and micro businesses of China and furtherstudiesthe dynamic change of the internal capital market of the listed companies of China during such financial crisis. This dissertation takes 2006-2009 as research interval, selects the listed companies controlled by group enterprises in A-sharesof Shanghai Stock Exchange and Shenzhen Stock Exchange as samples and eliminates some examples with certain standards. Moreover, this dissertation, on basis of macro-economic indices, defines 2006-2007 as economic booming period while 2008-2009 as financial crisis period and thereby researches the dynamic change of thetunnelingandpropping of the parent company of a group in different macro-economic contexts in terms of internal capital market of group. The main research issues of this dissertation are: (1) whether the financial crisis will affect the tunnelingand proppingbehavior of the parent company of a group; (2) whether the ultimate ownership and large shareholder’s holding proportion of a listed company may affect the dynamic change of the tunnelingand proppingof internal capital market of group; (3) whether the internal capital market of the group in China plays the role of Winner-pickingor has the Socialism Trend; furthermore, whether the impact of the financial crisis may affect the selection of internal capital market of a group in respect of such issue. Through empiricalanalysis, the research of this dissertation has found that: (1) different from the economic boom period, the head office of a group in the financial crisis period remarkably reduced the tunneling toits listed companies; (2) the ultimate ownership and the large shareholder’s holding proportion of the listed companies did not remarkably affect the dynamic change of internal capital market of the group.