Major Shareholder’s Equity Pledge And Tunneling ——The Case Study Of Kangdexin

The concentrated shareholding structure of listed companies often leads to a series of corporate governance problems such as the controlling shareholder’s monopoly in corporate decision making,the difficulty for small and medium shareholders to shake the position of the major shareholder and the failure of the supervisory level.At the same time,the majority shareholder who holds the advantage of equity can easily guide or even dominate the management decisions of listed companies,and thus can easily use the power in their hands to maximize their own interests,but may also cause losses to the rights and interests of small and medium shareholders.The difficulty of financing has always been a major problem for private enterprises.And equity pledges have become a major channel for private enterprises to obtain convenient financing.The controlling shareholders who hold a large amount of equity in listed companies have become the main force of equity pledge financing for private enterprises,and they can use a large amount of equity in their hands to pledge to obtain a large amount of capital financing.Although the equity pledge is the shareholders’ own behavior,which can bring a large amount of financing into the listed company,it also brings the corresponding risk to company.Based on the existing real-life cases of tunneling behavior,many of them have the shadow of large shareholders’ equity pledges.Previous studies have mostly started from large samples to study the connection between equity pledges and tunneling behavior of major shareholders,and to study the behavioral trends of equity pledges by major shareholders of all listed companies.This paper will use a case study approach to make a specific case study on how controlling shareholders influence their tunneling behavior to study the specific link between them and how they interact with each other,starting from a specific perspective that is more practically relevant.However,the tunneling behavior of major shareholders of listed companies is often hidden and difficult to be discovered,so some important information is difficult to obtain for analysis or even omitted,which in turn leads to the lack of persuasive power of the research results.Since tunneling behavior is often accompanied by financial fraud,the corresponding data in the annual reports of listed companies may lack a certain degree of authenticity and need to be studied in conjunction with relevant expert reports and subsequent disclosure documents.According to previous research findings,the tunneling behaviour of major shareholders is influenced by various factors,and it can be said that the equity pledges of major shareholders are inextricably linked to their tunneling behaviour.In terms of motivation,the pledging of equity shares by major shareholders brings about the problem of "separation of two rights",which also reduces their returns and amplifies their motive of hollowing out listed companies for profits;in turn,the pledging of equity shares provides opportunities for major shareholders to avoid risks and get out in disguise,which in turn intensifies their tunneling behaviour.The large amount of funds obtained from equity pledges also gives the major shareholders capital for misappropriation and stimulates their motivation to empty the listed company of funds and assets.Therefore,the correlation between equity pledges and tunneling behaviour of major shareholders may be an interaction between the two parties.Based on the previous study,the results of the case study in this paper not only found the transformation process of controlling shareholders’ equity pledge motive,but also verified the relationship of interaction between the two sides of major shareholders’ equity pledge and tunneling behavior,and also found the emptying ways of major shareholders’ using equity pledge to cash out,transferring funds through advance payment and using special pool of funds to misappropriate funds on this basis.Finally,based on the previous analysis and research,relevant conclusions and recommendations are drawn to provide reference for other enterprises of the same type to establish relevant systems to regulate equity pledges,curb controlling shareholders’ "tunneling behavior" and protect the rights and interests of small and medium shareholders.