There has been strong empirical evidence showing that controlling shareholders can take advantage of their group structures through connected transactions, especially in emerging markets where legal protection of investors is weak. La Porta et al. (1997, 1998, 1999, 2000), Johnson et al. (2000) and Glaeser et al. (2001) find that controlling shareholders can extract private benefits through “tunneling.” The expropriation of minority shareholders includes activities ranging from outright theft to selling assets or products at lower than market prices to a firm in which they have higher stake, or buying at high price from the firm. However, since Asian financial crisis of 1997-1998, more and more evidence suggests controlling shareholders can also use private resources to “prop up” the firm that is in trouble.1 That is, they temporarily transfer resources to the firm to boost the performance so that default or delisting is avoided. Thus, tunneling and propping are the two major purposes for controlling shareholders to engage connected transactions within their business group.2 They can both exist in the same company but during different time periods. The question is when and how much controlling shareholders are likely to choose tunneling or propping.