The Equity Pledge Of The Controlling Shareholder Impacts On The Medium Shareholders Benefit

With the rapid development of economy in China,the speed of enterprise expansion has accelerated.For the sake of the company or its own,the controlling shareholder has pledged the equity to apply for loans from financial institutions such as bank and securities company or to provide guarantees for others.This phenomenon in the capital market is really common.This paper has described the development of the equity pledge market and selected the company Julong Co.,Ltd.as a case study and analyzed that its controlling shareholders pledge the equity and how it effect on the benefit of minority shareholders.This paper introduced the equity structure,development strategy,and operating conditions of Julong Co.,Ltd and described its controlling shareholder's equity pledge and not pledge shares in recent years,and analyzed the characteristics of equity pledge behavior.By analyzing the impacts on the medium shareholders benefit,the conclusion is drawn.Through the incident research method,it founded that the controlling shareholder's equity pledged funds was invested in company itself,which enhanced the image of the company and delivered a positive signal to the market.However,when the funds were used for others,it indirectly damaged the benefit of shareholders and the stock price fell with the market responded negatively.In other words,the benefit changes of minority shareholders are closely related to the stock price changes.Concerning minority shareholders acceptance of risk,controlling shareholders' equity pledges will have a negative impact on the company's development strategies and the performance,which will indirectly undermine the long-term benefit of minority shareholders.In order to protect the benefit of minority shareholders,they should be vigilant,be aware of the strong capital requirements of major shareholders,and pay attention to the all aspects of the controlling shareholder,especially financial and business.They should analyze the equity pledge of the controlling shareholder influence on the company and make correct decisions.