A Study On The Relationship Between Equity Pledge Of Major Shareholders And The Violation Of Information Disclosure By Listed Companies

China has witnessed continuous growth in economic strength,at the same time,equity pledge as a simple and efficient way of financing is gradually gaining more and more favor among listed companies,especially in private companies showing explosive growth.However,the disorderly growth of equity pledge will also bring certain systemic risks.China’s Securities Regulatory Commission’s violation announcement shows that nearly 70%of the violations are information disclosure violations.Information disclosure,as a bridge between listed companies and the outside world,plays a vital role in establishing a fair and effective market environment.There may be a link between the pledge of equity and the disclosure of irregularities.Before the pledge of equity,listed companies may,in order to ensure the smooth implementation of the pledge of equity,artificially process the information disclosed before the pledge of equity,so that the company shows a benign state of operation to the outside world,thus making the pledgee sign the pledge agreement in the event that the pledgor is deceived.Moreover,after the equity pledge,listed companies also have a certain disclosure of irregular motives.The increase in equity pledge causes panic among investors who are afraid that the majority shareholder will take this opportunity to empty listed companies and run away with the money.So they have to sell the hands of the stock.The majority shareholder,in order to prevent the share price from falling,selectively,and even falsely disclose information to maintain the financial stability of the company.Such behavior not only seriously undermines the interests of small and medium shareholders but also reduces the efficiency of market resource allocation.In this paper,by studying the violation case of information disclosure of Hunan Chinasun Pharmaceutical Machinery Co.,Ltd.And with the support of the certain theoretical foundation,the author first analyzed the information disclosure of Chinasun’s majority shareholders and found that the overall quality is low and the voluntary disclosure content is less.Secondly,this paper focuses on the violations behavior of Chinasun’s majority shareholder,and tries to find out the link between the two concerning the time point of the majority shareholder’s equity pledge,including the disclosure of false financial statements,the external guarantee of multiple violations,and the existence of a large amount of unpublished private external debt,and analyzes the impact of equity pledge on the behaviors mentioned above one by one.This paper goes on to find the moral motivation for disclosure violations from the perspective of internal governance.Finally,some insights from the study of the case:(1)From the manager’s point of view,maintaining the objectivity of the board of directors and an excellent internal control system will reduce the company’s risk.(2)From the regulator’s point of view,in addition to diversifying the assessment of equity pledge programs and improving the independence of audit institutions,the regulator should make good use of big data and artificial intelligence technologies to adapt to the times,while at the same time enhancing the efficiency of regulation.(3)There is an urgent need to strengthen the disclosure of information under equity pledges,and companies should disclose more comprehensive pledges and bear administrative penalties that are greater than the proceeds of violations.A case study was used in this paper to reveal how the information disclosure of Chinasun is in line with the equity pledge of the majority shareholder,and the fact that whether the equity pledge will trigger information disclosure violations,to provide a regulatory thinking can reduce information asymmetry in the market,and also prepare for the arrival of the registration system.