Research On Employee Stock Ownership Plan Under Controlling Shareholder’s Equity Pledge

Using the way of equity pledge to finance the required funds has been sought after by many listed companies’ controlling shareholders.This approach is simple,low-cost and allows controlling shareholders to access large amounts of capital in a short period of time.However,equity pledge also brings potential trouble for the development of enterprises.In order to prevent the risk of equity pledge,enterprises often take some specific actions to stabilize the stock price and strengthen the control right,such as share repurchase and shareholder increase.As an effective incentive system,ESOP has also received much attention from listed companies.This mechanism stimulates employees’ sense of ownership and effectively reduces the contradiction between the company and employees,which is a positive signal of the long-term healthy development of the enterprise.So,will ESOP become a means of market value management for equity pledge companies to deal with equity pledge risks?Taking Tunghsu Azure Renewable Energy Co.,Ltd.as an example,this study focuses on the motivation of listed companies to launch ESOP and the actual effect of ESOP under the background of high proportion of equity pledge by controlling shareholders.The research of this paper can be summarized into the following aspects: First,this paper summarizes the personal research direction from previous studies,defines the important concepts of this paper,and arranges the relevant basic theories based on which this paper is written;Second,through to the Orient sky operation situation and situation of ownership structure,equity pledge,and the deep understanding of the process of employee stock ownership plan,summed up the Orient sky when facing high proportion of equity pledge with the motivation of employee stock ownership plan,the analysis of the actual effect of the employee stock ownership plan,inductive Orient sky the defects of the employee stock ownership plan and put forward Suggestions for improvement;Finally,based on the research conclusions of this paper,relevant suggestions are provided to stakeholders such as listed companies,investors and regulatory authorities.Through research,this paper draws a conclusion that the motivation of using ESOP after controlling shareholders pledge a high proportion of shares is not only to coordinate with the company’s strategic transformation and business stripping,but also to alleviate the pressure of equity pledge and deal with the risk of control transfer.This kind of employee stock ownership plan with "self-preservation" motive is obviously "short-sighted" and its practical effect is also weakened.Although it can bring excess returns to investors in the short term,in the long run,the ESOP does not have a sustainable effect on the quality of employees and enterprise innovation,nor does it play a sufficient role in promoting the daily operation and development ability of the company,and the financial performance of the company still shows an obvious downward trend.Therefore,in the face of a high proportion of equity pledge,it is not advisable to adopt the employee stock ownership plan to deal with the pressure of equity pledge and avoid the risk of control transfer,rather than fundamentally improve the company’s operating conditions and increase investors’ income.