Research On The Impact Of Controlling Shareholder’ Equity Pledge On The Interests Of Corporate Creditors

The scale of equity pledges by controlling shareholders of listed companies in China is increasing,and both the scope of equity pledges and the pledge ratio are much higher than those of listed companies in other economies,which has become a unique economic phenomenon in China’s capital market.The issuance of bonds is an important channel of financing for enterprises in China,but with the frequent occurrence of bond defaults,some of these defaults have exposed the problems behind the high proportion of controlling shareholders’ equity pledges and the infringement of corporate creditors’ interests by major shareholders,which have aroused great concern from public opinion and regulatory authorities.This paper therefore focuses on the pledging of controlling shareholders’ equity and explores the impact of pledging of controlling shareholders’ equity on the interests of corporate creditors by taking the conflict of interests between major shareholders and creditors as an entry point.Based on the current situation of China’s equity pledge market and bond market,this paper selects Pan Ocean Holdings,a typical representative enterprise with a high proportion of equity pledges by controlling shareholders,as a case study,and clarifies the connection between equity pledges and bond defaults in the light of its controlling shareholders’ equity pledges,and on this basis,focuses on the impact of controlling shareholders’ equity pledges on the interests of corporate creditors,based on four impact paths,including the path of separation of two powers,the path of agency The analysis is based on four impact paths,including the separation of powers,the agency conflict path,the investment behaviour path and the financial distress path,and finds that the controlling shareholder’s equity pledge has led to an increase in the separation of powers and has led to opportunistic behaviour such as appropriating the company’s capital,blindly over-investing and increasing financial risks to obtain control for personal gain and indirectly encroaching on the interests of corporate creditors.In addition,equity pledges accelerate bond defaults and information manipulation by controlling shareholders in the course of equity pledges also directly infringe on the interests of corporate creditors.Based on the above findings,this paper puts forward the following policy recommendations: first,improve the design of the equity pledge system;second,improve the quality of corporate information disclosure;third,improve the internal control system of enterprises;and fourth,actively play the role of a relief fund as a means to curb equity pledge risks and protect the interests of creditors.