Research On The Path Of Interest Encroachment By Major Shareholders Through Cash Pools

Over the past three decades,with the expansion of corporate size and organizational structure changes,the development of global financial markets,the rise of multinational operations,and the continuous advancement of information technology,corporate cash pools have increasingly expanded as an important part of corporate financial management.From August 2005,after the State Administration of Foreign Exchange approved General Electric(GE)’s bidding to determine the implementation of a bank’s US dollar cash pool business in China,the cash pool business consolidated its cash positions and saved external financing costs.Such advantages have been widely adopted by enterprise groups,and the cash pool business of enterprise groups has developed rapidly in China.Compared with the corporate group finance company,the cash pool business can better avoid risks in the operation of the financial company because of the involvement of a third-party institution,the bank.Therefore,the cash management business of the bank and the company has not been the object of key supervision.However,after the outbreak of Kangde’s new debt crisis in 2019,the risks of the corporate cash pool business began to surface.It was through the bank’s cash pool business that Kangde Xin’s major shareholders illegally occupied the funds of listed companies.China is a typical emerging market.Since the reform and opening up,the number of Chinese private enterprises has increased sharply from the transition from the planning system to the market system.At present,the common shareholding structure of enterprises is still concentrated or monopolistic.Against this background,incidents of major shareholders invading the interests of companies and small and medium investors have occurred frequently.In order to curb the major shareholders ’hollowing out behavior,China has formulated a series of rules and regulations on listed company disclosure of connected transactions,inside information,and protection of small and medium investors,but the problem of corporate controllers evading supervision through more covert methods still exists,and With the continuous development of asset management products such as the cash pool business in China,some products have problems such as careless settings and risks of violations,which can easily become a new channel for major shareholders to encroach on the interests.In addition,the current laws and regulations do not have sufficient regulations on the behavior of listed companies,and the penalties for violations by major shareholders are not strict.The incidents of hollowing out by major shareholderscontinue to occur,which not only harms the interests of small and medium investors but also disrupts the order of the capital market.This article takes Kang Dexin as a case.Through the research on the path of Kang Dexin’s major shareholders using the bank cash pool business to encroach on their interests,it is found that Kang Dexin has the following problems: First,Kang Dexin’s major shareholders make the listing through the bank’s cash pool business.The funds of the company and the parent company are mixed,and the funds of the listed company are occupied by this method.Second,Kang Dexin did not disclose the existence of the group’s cash pool,and concealed the company’s financial problems through years of financial fraud,and concealed the interests of major shareholders for a long time.The main reasons for this are as follows: First,the company’s management and shareholders’ meeting under the dual control chain are controlled by the major shareholder Kangde Group;second,the bank’s existence of a capital pool for Kangde’s new major shareholder Kangde Group and its subsidiaries exists The loopholes provide conditions for the occupation of major shareholders;third,listed companies join the group’s cash pool and provide a source of funds.This article proves that the cash pool business will indeed open the way for major shareholders to embezzle their interests.There is fierce competition among banks.Many of the asset management innovation businesses that have been introduced to meet the company’s needs are subject to compliance risks and the independence of banks is also affected.To this end,this article proposes that firstly,legislate to strengthen the supervision of the cash pools of listed companies,specify the types of cash pools that banks cannot establish,and prevent the cash pools from becoming a channel for illegal shareholders to occupy illegal interests;secondly,increase the illegal cash pools The third is to establish an equity check and balance mechanism to change the dominant position of the stock market and improve the level of corporate governance.The fourth is to further improve the information disclosure system.I hope to provide some help in suppressing such behavior in the future.