Study On The Tunneling Behavior Under The High Proportion Of Equity Pledge Of *ST Jingang’s Controlling Shareholders

Because equity pledge has a series of advantages,like easy to be changed into cash,largescale financing amount and conducive to maintaining the original control right at the same time,it is increasingly loved by the shareholders of listed companies.But as the equity pledge becomes more and more popular,its hidden tunneling risk is also gradually revealed.Therefore,the purpose of this paper is to analyze the influence of controlling shareholders’ high proportion of equity pledge on their tunneling behavior,specific tunneling methods and consequences.Then through the case analysis method,quantitative analysis method and comparative analysis method,study the case of * ST Jin Gang with huge hollowing out and high proportion of equity pledge of its controlling shareholders.I hope this paper can enrich the relevant literature,can be used as a reference for regulators and increase the market stakeholders’ attention.First,understand the relevant research background of this paper.Based on the now available research and correlation theories,this paper dose a thorough analysis of the current situation of equity pledge in China from three aspects: the overall overview of the equity pledge of A-share listed companies,the equity pledge of the controlling shareholders and relevant laws and regulations.Then,the case of *ST Jin Gang is introduced for specific analysis,and finally draw the following conclusions:(1)Impact: the controlling shareholder’s high proportion of equity pledge intensifies the tunneling behavior.On the one hand,equity pledge will lead to the restriction of cash flow right.With the increase of pledge proportion,it will further increase the separation of cash flow right and control right,and the "encroachment effect" of control right will be greater than the "incentive effect" of cash flow right,thus increasing the tunneling motivation.On the other hand,when the value of the Pledged Shares is lower than the loan amount,the controlling shareholders will choose to give up the Pledged Shares.Compared with the case of no equity pledge,the controlling shareholders recover part of the cost in a disguised form in advance and do not need to bear losses for the decline of the value of the Pledged Shares,which greatly reduces the tunneling cost.(2)Methods: There are many ways for controlling shareholders to empty their hands under the pledge of high proportion of equity,such as illegal guarantee and fund occupation,which are often accompanied by many illegal events,such as false transaction,illegal disclosure and so on.(3)Consequences: there will be many serious consequences,it will not only have a serious impact on financial situation and corporate governance of listed companies,but also damage the interests of minority shareholders,pledgees and other stakeholders.(4)policy suggestions:then put corresponding and reasonable countermeasures and suggestions at the two levels of regulators and companies.Regulators should consider strengthening the supervision effectiveness of intermediaries,imposing relevant restrictions on the equity pledge of controlling shareholders and improving the transparency of information disclosure;Then the companies should ensure the independence of the board of supervisors and the board of directors and improve its risk awareness.