Research On The Risks Of Small And Medium-sized Shareholders In The Pledge Of The Controlling Shareholders Of Listed Companies

Equity pledge is not only the concept of economics,as well as the concept of law category,it refers to the pledgor to set up its own equity as the subject matter right of pledge,through equity pledge for financing,in order to make up for the needs of the pledgor,if the pledge and the pledgor cannot fulfill debt at the end of the period,the pledgee may adopt the way of agreement,auction or sell the shares at a discount to achieve the pledge right,and to enjoy the priority of compensation with the proceeds.Pledge of shares of controlling shareholders refers to a financing method commonly used by controlling shareholders of listed companies.It means that controlling shareholders pledge their shares of listed companies to obtain financing from pledgees(mainly financial institutions such as banks,securities firms and trust companies).In recent years,with the rapid development of China’s capital market,equity pledge,as a new way of financing,has become more and more popular among the controlling shareholders of listed companies,especially private listed companies.The main reason is that the equity pledge financing has the advantages of simple procedures,simple procedures and few restrictions,and because the stock is easy to flow and easy to realize,the equity is generally accepted by Banks and other financial institutions.On the one hand,equity pledge helps the controlling shareholders to solve the financing problems with its unique advantages,and provides more possibilities for the controlling shareholders.On the other hand,with the increase of equity pledge ratio,the risk of equity pledge is gradually exposed.Because the pledge of the controlling shareholder’s equity will lead to the separation of control right and cash flow right,the higher the pledge ratio is,the more serious the separation degree will be,which will have a greater impact on the interests of listed companies and small and medium-sized shareholders.The blind high proportion of stock pledge by the controlling shareholders of listed companies can be converted into two forms of infringement.First,the stock price plummets,or even suspension,directly encroaching on the interests of minority shareholders;Second,pledged shares are forced to close,listed companies’ control rights transfer,business performance decline,the company’s interests are encroached,resulting in the loss of corporate assets,thus indirectly affecting the interests of small and medium-sized shareholders.Although these two kinds of infringements are not inevitable results of equity pledge,they are suspended over minority shareholders in the form of risks,which increase their investment costs and affect their investment confidence.From the perspective of actual cases,Letv ’s equity pledge case well reflects the huge risks suffered by minority shareholders under the high proportion of equity pledge of controlling shareholders.In this paper,Letv is taken as a typical case to trigger the reflection on the whole stock pledge system.How to guard against the risk of minority shareholders has become an unavoidable problem in the capital market.It is against such a realistic background that this paper takes the topic of "Research on the Risks of Small and Medium-sized Shareholders in the Pledge of the Controlling Shareholders of Listed Companies" as the topic.Through five chapters,this paper analyzes,studies and demonstrates the topic,and finally puts forward specific countermeasures and Suggestions.The basic structure of the thesis is as follows.The first chapter is the introduction.This chapter introduces the research background,research purpose and significance,domestic and foreign research literature review,research methods and other contents.In the part of literature review,the paper analyzes the influence of the pledge of the controlling shareholder’s equity on the value of the company and the influence of the interests of small and medium-sized shareholders,and finds that the pledge of the controlling shareholder’s equity will lead to the increase of the separation of the two rights,and make the controlling shareholder more motivated to seize the company,which will have an adverse impact on the value of the company.The increasing separation of the two rights will cause the controlling shareholders to seize the interests of minority shareholders,and minority shareholders cannot make timely investment adjustment due to asymmetric information,resulting in loss of interests.The second chapter,taking Letv as an example,analyzes the risk of equity pledge of controlling shareholders to minority shareholders.The direct risk is that Letv stock price decline causes the interests of small and medium-sized shareholders to suffer,Letv long-term suspension and deprivation of small and medium-sized shareholders of stock trading rights;Indirect risk is the indirect damage to the interests of small and medium-sized shareholders caused by Letv’s business performance and company value decline and the risk brought by controlling shareholders’ blind expansion strategy.The third chapter is the basic concept and related theory of the equity pledge system.This chapter first defines the concept of equity pledge of controlling shareholders,the concept of controlling shareholders and minority shareholders,and the concept of control right and cash flow right.Maintaining or enhancing control;Shifting risk through options;Expropriation of benefits.Then,starting from principal-agent theory,private interest in control theory,information asymmetry theory and fiduciary duty theory,the theoretical reasons for the infringement of the interests of minority shareholders are preliminarily analyzed.The fourth chapter is the present regulation and the deficiency of our country’s equity pledge system.This chapter in view of the controlling shareholder equity pledge for small and medium-sized shareholders interests loss caused,respectively from the controlling shareholder behavior constraints on legislation and legal protection of minority shareholders interests,equity pledge disclosure,connection of company law and the civil law system,analyzes the current law of our country system of shareholding pledge,and analyzes its disadvantages.The fifth chapter is the countermeasures and Suggestions to protect the interests of small and medium-sized shareholders under the background of stock right pledge of controlling shareholders of listed companies.In chapter 4 of this chapter for equity pledge system in China based on the analysis of the existing rules and its deficiencies,respectively from the perfect controlling shareholders fiduciary duty,perfecting the controlling shareholders abuse control accountability system,improve the small and medium-sized shareholders’ right to know of shareholders,restrict controlling shareholders equity pledge voting rights,restrict controlling shareholders after the frequency and percentage of equity pledge,perfecting the controlling shareholder equity pledge of information disclosure,make clear the property of equity pledge related specification,refinement and improvement of the controlling shareholder,the provisions of tort liability puts forward countermeasures and suggestions.