The Case Study On The Major Shareholder's Equity Pledge Of LETV

Equity pledge is a kind of financial activity in which the owner of the equity takes its ownership as a pledge guarantee and borrows capital from financial institutions.In recent years,due to the continuous downward pressure on Chinese economy,equity pledge as a emerging financing,has been favored by listed companies and major shareholders for its advantages such as simple operation,good liquidity and maintainable control of major shareholders.However,with the rapid rise in the frequency and proportion of equity pledge,the risk caused by it has gradually emerged.The equity pledge explosion incidents of the major shareholders in Goody,Coship,Geo-Jade,LETV and other listed companies caused a wide concern over the risk of equity.At present,the research on the risk of equity pledge by major shareholders has not yet formed a complete theoretical system,nor to mention the attention been paid to the consequences and countermeasures caused by the risk of equity pledge.Therefore,it is of great practical and theoretical value to study on the risk of major stockholders' equity pledge.This thesis is mainly based on the case of Jia Yueting's equity pledge,who is the major shareholder in LETV.Firstly,the paper elaborates research background and significance,reviews the researches done by domestic and foreign scholars on the motivation,risk and countermeasure of major shareholders' equity pledge.And it summarizes types of the motivation and risk of major shareholders' equity pledge.Secondly,this paper introduces the theoretical basis and the institutional background.And it introduces the basic information of LETV from these four aspects: the company profile,the business model,the development and the ownership structure.Then it reorganizes the process of the major shareholder's equity pledge in LETV,and analyzes the characteristics of Jia Yueting,the major shareholder's equity pledge.Finally,based on analysis of the motivation of Jia Yueting's equity pledge,the paper studies on the risk types of Jia Yueting's equity pledge,and draws relevant conclusions and enlightenment.In this paper,the study found that the major shareholders Jia Yueting using equity pledge to maintain the original control,broaden their financing channels,for its personal investment to obtain a large amount of cash flow,once the major shareholders for the purpose of cashing out,however,large-scale pledge equity,the other side of the large proportion of reducing its stake in order to improve the accumulative total of shareholding pledge,major shareholders equity pledge risk,including the risk of moral hazard under the circumstance of asymmetric information,the value of equity volatility has been liquidated mass equity market risk,large proportion of equity pledge the risks of control transfer,and the equity pledge is illegal,the legal risks of breach of contract.According to the case analysis and the research conclusion,the research implications of this paper are obtained :(1)the internal governance structure of listed companies should be improved to ensure the good development atmosphere of the company;(2)raise the risk awareness of equity pledge and guard against the risk of equity pledge;(3)strengthen the supervision of the company and the pledgee in order to play an active role in the equity pledge;(4)we should improve the standard and information disclosure system of major shareholders of listed companies,and strengthen the punishment of illegal and default behaviors of major shareholders of listed companies.