A Study On The Emptying Behaviour Of Europol Intelligent Network Co.,Ltd.’s Major Shareholders Based On The Perspective Of Internal Control

The "14th Five-Year Plan" report points out that China’s economy is growing rapidly and has become the second largest economy in the world.However,due to the drive of interests,various violations have also increased.At the beginning of 2023,the SFC informed that 609 violation cases were accepted in 2022,among which the major shareholder hollowing out cases accounted for more than one tenth.26 February 2019 Europol received the Notice of Investigation from the CSRC,which found that the major shareholder had irregular guarantees totaling 1.34 billion yuan,exceeding 10% of the company’s latest audited net assets,and on 29 April 2020,it filed a case against Chen Lihao,the actual controller of Europol,filed a case for investigation and imposed a fine of 900,000 RMB and a lifetime ban from the securities market,which eventually led to the delisting of Europol on July 25,2021 due to the emptying behavior of the major shareholder.Based on information asymmetry theory,signaling theory,and private benefit theory of control,this thesis uses Europol Intelligent Network Co.,Ltd.as a case study for in-depth analysis.It sorts out the specific means to implement the emptying behavior of Europol’s major shareholders,and analyzes the economic consequences of the emptying behavior of major shareholders on the operation of listed companies and small and medium shareholders by using the data from 2014-2021 Europol’s annual reports,CSMAR and SEC announcements.Then,based on the perspective of internal control and the five elements of COSO internal control,the corporate governance structure,investment risk and operation risk,corporate seal management and business authorization and approval system,information disclosure timeliness and truthfulness,and internal control organizational structure were selected for these five elements.We analyzed the causes of Europol’s emptying behavior to major shareholders as indicators.In the end,the study proposes recommendations for the prevention of short-selling by major shareholders based on the perspective of internal control.The study shows that Europol’s major shareholders mainly engage in short-selling through capital appropriation,illegal guarantee and equity pledge,and the short-selling methods are diverse and concealed.The main causes of the short selling behavior of major shareholders from the perspective of internal control are high concentration of equity,lack of risk assessment mechanism,unimplemented audit system,untimely and distorted information disclosure,and lack of strength of internal supervision.Therefore,in addition to strengthening external supervision,enterprises should improve their corporate governance structure,strengthen internal control management and internal supervision,improve the quality of internal control by using risk assessment and standardizing internal control information disclosure,and promote a good internal environment for enterprises,so as to avoid the occurrence of large shareholders’ emptying of corporate assets and achieve high-quality corporate development.