Research On The Economic Consequences Of Equity Pledge Of Huayi Brothers’ Controlling Shareholders

Because of the low threshold of equity pledge,the simple procedure of related pledge and the few restrictions,equity pledge has become more and more popular in many listed companies.However,with the increasing scale of equity pledge in the market,many disadvantages will be exposed.For example,the listed company shareholders’ equity has been forced to close positions.Many controlling shareholders of listed companies pledge their shares for financing to meet their own or listed company’s capital needs.However,with the high proportion of controlling shareholders’ pledge,it will bring some negative effects to the company and the market.Therefore,in recent years,there have been cases of the transfer of control rights due to the large proportion of the controlling shareholders’ equity pledge in the capital market,and the interests of the majority of small and medium-sized shareholders have also been infringed.Therefore,from the perspective of controlling shareholders’ equity pledge,this paper aims to study why it carries out a high proportion of equity pledge,whether it has interests encroachment due to its controlling shareholders’ status.This paper selects Huayi Brothers as a case company,using case study method to study the economic consequences of controlling shareholders’ equity pledge.Starting from the research background and significance,combined with the previous research results made by scholars at home and abroad,study and summarize the theories related to the research content to lay a solid theoretical foundation for the start of the research.Then it analyzes the current situation of equity pledge of Listed Companies in China,and understands the general environment of equity pledge of Listed Companies in China.Then it introduces the development process of the case company,analyzes the case company step by step,and analyzes its pledge motivation.Finally,using various models,combined with company data,this paper studies the economic consequences of controlling shareholders’ equity pledge,and puts forward relevant suggestions.According to the previous case study,Huayi Brothers’ controlling shareholders will separate their control right and cash flow right after equity pledge.At this time,regardless of whether the controlling shareholders have the motivation of interest encroachment,it will bring the result of infringing the interests of stakeholders.Andin the high proportion of equity pledge,it will lead to the decline of the company’s value,bring negative market reaction and other economic consequences.Therefore,it is necessary to strengthen external supervision,improve relevant laws and regulations,and establish a sound corporate governance mechanism for controlling shareholders of listed companies.