【借别人的力量赚币】We examine how regulators tackle two types of widespread tunneling activities in China.
Controlling shareholders and related parties can divert assets from listed firms or coerce firms to
serve as guarantors on questionable loans. The government announced and enacted two new rules
during the same period: the first rule prohibits asset diversion from listed firms for
‘non-operational’ purposes by large shareholders, while the second standardizes the practice of
listed firms providing loan guarantees. Relative to firms not affected by either rule, firms
complying with the first rule experience a reduction in the ownership stakes of controlling


shareholders, an increase in investment, and significantly better performance. The second rule has
no impact on firms. Our results highlight the importance of enforceability: laws and regulations
that can be enforced at lower costs are much more likely to succeed, especially in countries with
weak institutions