The Study Of The Causes And Prevention Of Controlling Shareholder’s Tunneling Behavior Under Equity Pledge

Equity pledge is a financing method in which the pledgor holds the enterprise equity as the subject matter and applies for loans from financial institutions.This method of obtaining funds is favored by controlling shareholders because it has many advantages such as fast approval speed and easy realization.In recent years,equity pledge is particularly prevalent,but frequent and high proportion of equity pledge will increase the degree of separation between control rights and cash flow rights,so as to reduce the cost of interest expropriation by controlling shareholders,and thus induce the interest expropriation by controlling shareholders of listed companies.At the same time,the loopholes of corporate internal governance and external supervision also provide convenient conditions for controlling shareholders to encroach on interests.Therefore,this paper analyzes the causes of controlling shareholder’s benefit encroachment easily induced by equity pledge through case study,and puts forward some preventive measures.After reviewing relevant scholars’ literature on equity pledge and benefit embezzlement,the paper takes Xinguang Yuancheng as a case enterprise to study.Firstly,it introduces the general situation of the case enterprise and the controlling shareholders,and describes the ways of equity pledge and benefit embezzlement.Secondly,combining theory with practice,this paper analyzes the causes of interest embezzlement of controlling shareholders under equity pledge of Xinguang Yuancheng,including the inducements,opportunities and excuses that lead to interest embezzlement of controlling shareholders.Finally,from the aspect of external supervision,the author puts forward some suggestions to prevent the usurpation of interests under equity pledge.The study found that the controlling shareholders of Xinguang Yuancheng usurpated the interests of the company after the high proportion and frequent equity pledge,specifically by misappropriating funds of listed companies and making listed companies guarantee the controlling shareholders in violation of regulations.This behavior will not only make enterprise performance decline,but also harm the interests of small and medium investors.The controlling shareholders of Xinguang Yuancheng can successfully carry out the embezzlement of interests not only because the stock pledge aggravates the separation of the two rights and reduces the cost of the embezzlement of interests,but also because of the loopholes in the internal corporate governance and external supervision of Xinguang Yuancheng.In order to prevent the controlling shareholders of listed companies from usurpating interests after equity pledge,the paper proposes the following preventive measures from the aspect of external supervision: In view of the equity pledge behavior of controlling shareholders,the external regulatory agencies of enterprises should establish a risk early warning system,strengthen the standardization of information disclosure,adjust the proportion of voting rights of controlling shareholders after equity pledge,and strengthen the attention of financial institutions to enterprise performance.In view of the interests encroachment behavior of controlling shareholders after pledge,enterprises should strengthen the punishment,strengthen the role of media,strengthen the external audit,and introduce the independent supervisor system.It is hoped that these suggestions can contribute to the healthy and sustainable development of listed companies and make equity pledge play a positive role as a financing tool.