The Benefits Expropriation Behaviour Under The Equity Pledge Of Controlling Shareholders In China's Listed Companies

As a kind of right pledge,equity pledge has become an important financing instrument in the capital market of our country.Especially in recent years,the equity pledge has been in an expansion growth.Take the year of 2016 for example,there are about 323 billion shares of equity been pledged,involving a reference value of more than 4 trillion yuan.In order to revitalize the equity they hold,more and more controlling shareholders of listed companies also use equity pledge to raise capital.The equity pledge has also been all in a day's work to some of the controlling shareholders of the listed companies.Because of its special status in the listed company,the behavior of equity pledge of the controlling shareholder has been paid special attention.Especially in the second half of 2015,China's A share market was in a deep adjustment and the stock market experienced a lot of volatility.A number of listed companies that equity had been pledged forced to face the risk of liquidation.The risk of equity pledge has been exposure and the study of equity pledge is also becoming increasingly important.Although the behavior of controlling shareholder's equity pledge is its own thing,the equity pledge will also affect the listed companies.Controlling shareholder's equity pledge may bring the listed company both positive effects and negative effects.For some controlling shareholders with ulterior motives,equity pledge is more likely to lead to the principal-agent problems and becomes a mean of exporting interests from the listed companies.On the one hand,by equity pledge,the controlling shareholder can recover part of the cost of investment and reduce the tunneling cost.On the other hand,in the status of equity pledge,the controlling shareholder's cash flow rights is limited,but the control rights remain unchanged.The separation of the two rights is more likely to bring the principal-agent problems.The principal-agent problem has already exist between the controlling shareholders and the minority shareholders and the equity pledge can further deepen the problem by separating control rights and cash flow rights.Therefore,the studies of the equity pledge behavior of controlling shareholder are on a trend to ascend.Especially in the second half of 2015,China's A-share market entered into a depth of the adjustment and causes volatility in the stock market.A number of equity that had been pledged showed a slump at its price,facing the risk of compulsory liquidation.Exposing its risk,equity pledge was pushed to the fore,demonstrating the significance of studies about it.This dissertation firstly summarizes the general situation of equity pledge of Listed Companies in China and then uses the case study method to analyzing the equity pledge behavior of Beisheng pharmaceutical company and thus illustrating the relationship of behaviors of equity pledge and tunneling the listed companies of the controlling shareholder.During the case study,the dissertation firstly analyses the reason why equity pledge can contribute to the principal-agent problem and then the dissertation analyses the principal-agent problem in details.Thirdly this dissertation concludes the effects of that equity pledge brings to the listed company.At the end of this paper,the dissertation gives some practical suggestions and advices on how to prevent the controlling shareholder from occupying the interests of the listed company.