Research On The Behavior Of Interest Encroachment Under The Equity Pledge Of Shenwu Environmental Major Shareholder

In China’s capital market,financing methods are increasingly diversified.Compared with traditional financing methods such as bank credit,equity pledge is frequently used by shareholders due to its advantages of large financing amount and simple operation.Although the pledge of major shareholders’ equity is to dispose of their own shares,it will also bring risks to the listed company.If the major shareholder wants to encroach on the interests of the listed company at the very beginning,and the equity pledge can be realized in advance,it will become a means of encroach on the interests.If the pledge of major shareholders’ equity is only to solve the financing needs,but the control right does not change after the pledge of equity,but the cash flow right of the pledged part is transferred to the pledgee accordingly,the conflict between the two will be further deepened with the increasing degree of separation of the two rights.Therefore,no matter whether the pledge of major shareholders’ equity is for the purpose of solving the financing needs or reducing the cost of interest encroachment,under the background of the pledge of major shareholders’ equity,there is indeed the risk of interest encroachment,which can serve as a warning signal of "major shareholders’ interest encroachment" to minority shareholders.Based on the principal-agent theory and signal theory,this paper first introduces the basic situation of Shenwu Environmental and the case background of pledge of major shareholders’ equity,and then analyzes that in the related party transactions of Shenwu Environmental,major shareholders occupy a large amount of funds of Shenwu Environmental through their controlled related parties,and fail to perform the review procedures to let Shenwu Environmental guarantee themselves and their subsidiaries and then transfer them Transfer the resources of listed companies and other means to encroach on the interests of listed companies.In the early stage,the major shareholders have obtained huge financing loans through equity pledge when the stock price is high,and transferred the risk of stock price decline to the pledgee.In disguised form,the major shareholders’ interest encroachment will be more unbridled,causing serious losses to the listed companies and small and medium shareholders.Finally,from the perspective of corporate governance theory,this paper analyzes the internal and external problems of Listed Companies in order to explore the root causes of major shareholders’ interest encroachment,and accordingly proposes solutions from internal and external aspects,hoping to improve the governance level of Shenwu Environmental,and also provide reference for other companies.