| Equity pledge is one of financing ways in which funds held by shareholders are used as collateral to obtain funds.Due to the convenience and low cost,equity pledge is favored by many companies.For the controlling shareholder,the equity pledge can obtain more funds without changing his control rights,transforming the “economic stock” into “economic energy” and improving the efficiency of asset utilization.Therefore,controlling shareholders would take advantage of equity pledge to cash out their shares in advance to facilitate the tunneling.Taking the typical case of Baoqianli Company as an example,this paper analyzes the mechanism of equity pledge on tunneling based on principal-agent theory and information asymmetry theory.The result shows that continuous pledge of equity will lead to a rapid increase in the degree of separation between the control and ownership,and at the same time,shareholders cash out their shares with equity pledge in advance will reduce the cost of tunneling.Subsequently,this paper analyzes the tunneling mode by controlling shareholder Zhuang Min.The first step,cashing out by equity pledge.Second,transferring company assets by investment,occupying company funds and illegal guarantee for other companies.Finally,Zhuang Min defaulted on the equity pledge and lost contact..In this case,the failed internal controls,the weak supervision of the intermediaries and the lack of attention to the equity pledge behavior are the main reasons why Zhuang Min successfully used the equity pledge to implement tunneling.This paper also finds that imperfect laws is one of the reasons for the high risk of equity pledge.The above actions not only have a very bad impact on the company’s operation and financial status,but also caused serious losses to investors and pledgee,while Zhuang Min lost the link after taking profits.Conclusions are as follows,equity pledge has a positive incentive effect on tunneling and aggravate the consequences of tunneling,and it will not necessarily have a significant negative impact on the company in the short term.Based on the above reasons,this paper puts forward suggestions on how to prevent shareholders from tunneling through equity pledge. |
