Research On Tunneling Behavior And Economic Consequences Of Controlling Shareholder’s Equity Pledge

With the development of China’s capital market,the financing mode of enterprises is changing constantly.In recent years,equity pledge financing has developed rapidly and has become an important financing tool.Due to the convenience of equity pledge financing,in recent years,the scale of equity pledge financing in A-share market has shown a relatively high growth.Especially in the past two years,the total amount of equity pledge has reached five trillion yuan.Equity pledge brings not only convenient financing to the majority of shareholders,but also significant risks.Controlling shareholders can reduce the cost of tunneling and encroach on the interests of listed companies.In many stock rights pledge,the controlling shareholders’ pledge behavior accounts for a very high proportion,and the pledge behavior of small and medium shareholders can be ignored.On the surface,the behavior of controlling shareholder’s equity pledge is personal behavior,but because the controlling shareholder has a unique position in the enterprise,its own behavior will have a favorable or adverse impact on the enterprise,so the behavior of controlling shareholder’s equity pledge can not be simply attributed to personal behavior,which will have a significant impact on the enterprise.Taking kangdexin as an example,this paper studies the equity pledge behavior of its controlling shareholder Kangde group,and finds that equity pledge causes the separation of control right and cash flow right,reduces the tunneling cost of the controlling shareholder,makes the controlling shareholder encroach on the interests of the listed company,and damages the rights and interests of small and medium shareholders.At the same time,a series of problems will arise after the controlling shareholders are forced to close their positions,which will have a serious adverse impact on the company’s operation.This article first summarizes the current situation of China’s equity pledge,and then uses the case analysis method to study the controlling shareholder Kangde Group’s equity pledge behavior.In the case analysis process,first introduced the relevant situation of Kangde new company,combed the behavior of controlling shareholder’s multiple equity pledges,and analyzed the motivation of controlling shareholder’s equity pledge.Then combined with the investigation report of the Securities Regulatory Commission,analyze the performance of controlling shareholders’ hollowing behavior.Then it analyzes the degree of separation of control rights and cash flow rights under equity pledges and the short-term market response to equity pledges and draws relevant conclusions.Finally,some suggestions are provided on how to prevent the controlling shareholders from emptying the listed company through equity pledge.