The Impact Of Controlling Shareholders Equity Pledge On The Corporate Value

As a new type of financing,equity pledge is favored by shareholders of the company with the advantages of simple process,strong liquidity and limited restriction.However,as the current supporting system has not been perfected,the equity pledge provides an opportunity for the controlling shareholder to encroach on the company interests.In the context of the high concentration of equity in listed companies in China,the controlling shareholder’s pledge of equity often affects the entire company.Therefore,studying the impact of controlling shareholders equity pledge on the company value has practical significance and reference value for the company value enhancement,investor protection and the stable and sustainable development of the capital market.The paper expounds the basic principles of equity pledge and company value,examines the history and motives of “Shanghai RAAS” for equity pledge,and analyzes the impact of equity pledge on its financial performance,market value,and value creation ability from three perspectives of company value,and then refine the basic conclusions,policy implications,and put forward follow-up topics.The main points of the paper are:1.The motive for controlling shareholders to pledge equity is mainly divided into three categories: supportive motives,encroachment motives and neutral motives.The equity pledge behavior under different motives affects the company value through the agency problems caused by separation of two rights,the signal effect caused by the market value management,and the risk preference affecting the investment decision.2.The motive for the controlling shareholder to pledge equity can be identified through public information.In the case of “Shanghai RAAS”,the public information includes the investment style and working experience of the controlling shareholders,the behavior of increasing stock holdings before and after equity pledges,and investment decisions with gradually increasing risk appetite.Combining the above information,we can reasonably infer the motivation for the controlling shareholder to pledge equity at different stages.3.There are differences in the impact of equity pledge on company value under different motivations.As for “Shanghai RAAS”,from the perspective of financial performance and value creation ability,the company’s value fluctuation trend is basically the same.As the pledge motive shifts from neutral and support to embezzlement,it showsmaintaining stability-gradually rising-somewhat Declining.However,in terms of market value,the controlling shareholder’s equity pledge has no significant impact on the company stock price in the short term,and the Tobin Q value only fluctuates greatly in individual years.4.Realizing the effect of equity pledge on the value of the company still requires multiple efforts.At the level of internal governance,it is necessary to improve the equity check and balance mechanism and disclose internal control reports in a timely manner;at the level of external supervision,the information disclosure system for equity pledges should be improved to strengthen the restraint on the behavior of controlling shareholders;investors should increase the attention,and continuously monitor and supervise the pledge of equity in listed companies.The thesis attempts to analyze the motivation of controlling shareholders equity pledge and its impact on the value of the company through case studies,and provide a reference for regulating and guiding equity pledge behavior,improving corporate governance and strengthening external supervision.However,listed companies have diversified motives for equity pledge and limited disclosure information,and the value of the company is also affected by various factors.Therefore,the depth and breadth of the paper’s investigation needs to be strengthened and expanded.Follow-up studies will continue to work on this.