Equity Pledge And Large Shareholder Expropriation

Because of its short approval process,high efficiency and low cost,equity pledge has become a widely adopted financing method in the capital market.Since 2018,the capital market has been greatly adjusted,the leverage has been tightened,the stock price fluctuates sharply,and the risk of equity pledge is gradually exposed.Equity pledge is not only the behavior of large shareholders’ own behavior,but also has an inextricable relationship with listed company and small and medium-sized shareholders.The original intention of equity pledge is to relieve the financial pressure of the company,but the high proportion of pledge leads to the separation of control right and cash flow right,which makes the large shareholder expropriation on the little risk and cost and then expropriate on the listed company,and its negative influence needs to be paid attention to and studied.Based on the typical case,Kangdexin,this paper explores the motivation of Kangdexin equity pledge.According to the analysis of the process of large shareholder’s expropriation,it is found that large shareholder is mixed with the funds of listed company through the linked account,the funds of listed company are transferred to their own hands through related party transactions and related guarantees,which eventually results in the default of listed companies’ debts,and the breakage of capital chain.By analyzing the influence of equity pledge on the motive of expropriation and ways by which the large shareholder expropriate,the paper probes into the influence of the equity pledge on the expropriation deeply.It is found that equity pledge will lead to the increase of unequal degree between control right and cash flow right,which will aggravate the motive of large shareholder’s expropriation.In the case of increasing the motive of expropriation,large shareholder will choose projects which are beneficial to themselves rather than all shareholders’ value maximization.In addition,the study found that whether the major shareholders’ equity pledge supports or expropriates the company is based on the consideration of maximizing their own interests,and the two are not in conflict.