Research On The Benefits Expropriation Behaviour Of Controlling Shareholder Based On Equity Pledge

In December 2018,the Shanghai Stock Exchange severely punished the benefits expropriation behaviour of the controlling shareholders of three listed companies,and the benefits expropriation behaviour of the controlling shareholders has once again caused heated discussion in the capital market.Although the relevant departments have increased their inquiries and supervision for the controlling shareholders,due to the inefficiency of other external supervisions and the lack of internal directors,the controlling shareholders still use regulatory loopholes in various ways to occupy the interests of listed companies.These actions of the controlling shareholders not only seriously damage the interests of listed companies and small and medium shareholders,but also affect the healthy development of the capital market.The benefits expropriation behaviour of the controlling shareholders is often accompanied by a high proportion of equity pledge.According to the data released by ZHONGDENG CHINA,the number of equity pledge of A-share market has been increasing in the past five years.By the end of 2018,there were 3,433 listed companies with equity pledge.The total number of equity pledge reached 634 billion shares,and the total market value of equity pledge amounted to 4.23 trillion yuan.The total equity pledge proportion of the A-share market reached 9.75%.There were 132 listed companies with a pledge ratio of more than 50%,and the ratio of pledge between 30% and 50% had reached 611.The high proportion of equity pledge of the controlling shareholder has undoubtedly facilitated the benefits expropriation behaviour.Based on the equity pledge behavior of the controlling shareholder of PROTRULY,this paper studies the benefits expropriation behavior of controlling shareholders from the perspective of equity pledge.In the analysis part,firstly,the basic situation of PROTRULY and the equity pledge of the controlling shareholder are briefly described.Secondly,this paper discusses the mechanism of the effect of equity pledge on the behavior of controlling shareholder of PROTRULY.Then,the benefits expropriation behaviors of the controlling shareholder and the consequences of the controlling shareholder’s benefits expropriation were analyzed.Finally,the research discussion gives some suggestions on how to prevent the benefits expropriation under the frequent equity pledge.According to the study,under the frequent equity pledge of controlling shareholder,on the one hand,the control rights and cash flow rights are highly separated,which deepens the problem of principal-agent between controlling shareholders and minority shareholders.On the other hand,equity pledge recovers the investment cost and reduces the cost of benefits expropriation.In addition,the equity pledge not only provides incentives for the controlling shareholder’s expropriation,but also provides convenience.Its expropriation has seriously affected the interests of small and medium shareholders.Based on the research of theory and case,this paper puts forward relevant suggestions from two levels,which has practical significance for restraining the frequent equity pledge of controlling shareholders and protecting the interests of listed companies and small and medium shareholders.