A Study Of Controlling Shareholders’ Emptying From The Perspective Of Shareholding Pledge

Equity pledge is an effective financing that uses the shares of a company as pledges to improve the efficiency of the use of capital and also allows controlling shareholders to convert "economic stock" into "economic capacity" without affecting the control of the company.It also allows controlling shareholders to convert "economic stock" into "economic capacity" without affecting the control of the company,thereby obtaining more capital.The convenience and low cost of equity pledges have been welcomed by many SMEs.As a result,controlling shareholders are able to sell their shares in advance through equity pledges in order to facilitate subsequent capital flows.Through a case study of SKC,this paper explores the mechanism of the impact of share pledges on the emptying of major shareholders.The results show that constant share pledging by firms leads to the separation of two rights,while share pledging can also help large firms cash out early,thus covering the cost of shelling out.This paper provides an in-depth analysis of the paths through which large firms engage in shelling out: firstly,they will use share pledges to obtain early returns;secondly,they will transfer company assets through foreign investments,take up company funds and violate guarantees;and finally pledge defaults.In this case,the failure of internal control of the company,the ineffective supervision of intermediaries and the negligence of the community on the share pledging behavior are the reasons for the major shareholders to engage in hollowing out.After comparing the regulatory standards for equity pledges before and after the promulgation of the new regulations on pledges,it is clear that the imperfection of the legal and regulatory system is an important reason for the higher risk of equity pledges.Such behavior has not only brought great losses to enterprises,but also brought great bad effects to small and medium-sized investors and pledgees.An in-depth analysis throughout the paper reveals that equity pledges act as a positive incentive for large shareholders to empty their motives,which in turn leads to more serious economic consequences and a broader range of victims.Nevertheless,equity pledges do not necessarily have a clear negative effect on firms in the short term.In order to prevent controlling shareholders from abusing their power to commit short-selling and to reduce losses for all parties,this paper combines the above-mentioned reasons with targeted recommendations for both internal and external aspects of the company.