The Influence Of Equity Pledge Of Controlling Shareholder On The Value Of Listed Company

Because of less financial constraints,can quickly activate the company’s funds,Equity pledge become the primary financing method when the capital turnover of listed companies is insufficient.However,this seemingly "hot" equity pledge also has hidden dangers.Equity pledge repurchase events of many securities companies such as Southwest Securities,Guo yuan Securities and CITIC Securities,and the frequent outbreak events of stock pledge of the controlling shareholders of listed companies since 2018,have once again aroused public attention to equity pledge.In order to standardize the equity pledge business,the government regulatory authorities issued the strictest new regulation on equity pledge in 2018,which strictly stipulated the pledge rate,the integration party and the securities firm.However,the company’s business development is still constrained by such capital diseases as inadequate management,lack of internal control,and indirect promotion of large shareholders’ cash out.In this context,this paper makes an in-depth study on equity pledge.Huayi development was in leading position in the film and television industry,but by the end of 2019,its controlling shareholder have almost completely pledge its hands’ holding shares,the pledge proportion directly reaches 99%,and corresponding to that,the company’s performance as well its industry status gradually declined,this phenomenon is noteworthy,so choose this case to study the effects of equity pledge to the company.Based on the separation of two rights theory and principal-agent theory,this paper is divided into six parts and mainly answers three sub-questions:(1)what is the specific impact of the pledge of controlling shareholder’s equity on the value of Huayi brothers;(2)What the change in the value of Huayi Brothers after the pledge of the controlling shareholder’s equity is.(3)How does the pledge of controlling shareholders’ equity affect the value of Huayi Brothers.First of all,based on the existing research and the background of Huayi Brothers controlling shareholder’s equity pledge,this paper analyzed the process,characteristics and motivation of its equity pledge.Secondly,through comparing the company’s market value and book value before and after the equity pledge,the paper studies the specific impact of controlling shareholders’ equity pledge on the company’s value.Then through the horizontal and vertical comparison of Huayi Brothers’ EVA value from 2011 to 2019,this paper comprehensively and systematically analyzes the influence of controlling shareholder’s equity pledge on the company’s value.Finally,on account of the factors of separation of control rights and cash flow,the risk factors of liquidate positions and the factors of investment risk preference rights,the paper explains the influence mechanism how Huayi Brothers controlling shareholders’ equity pledge acts on corporate value.The conclusion is drawn that the long-term and frequent pledge of high proportion of shares by the controlling shareholders of Huayi Brothers has a negative impact on the value of the company,and the short-term and long-term development of the company is hindered.In order to promote the sound development of the capital market,the company itself and relevant government departments should make joint efforts to standardize the behavior of the controlling shareholders by strengthening the information disclosure,constructing the internal control system of mutual checks and balances and perfecting the supervision mechanism of the pledge of equity,so as to promote the development of the pledge of equity financing in China.