Research On The Motivation And Economic Consequences Of Equity Pledge Of The Controlling Shareholder Of MJNY

As a new financing method with lower financing cost,faster speed and no influence on control rights,equity pledge is favored by the controlling shareholders of listed companies.However,with the deepening of the degree of equity pledge,the potential risks are gradually highlighted.Once the stock price fluctuates abnormally,there may be the risk of stock price collapse or even the risk of control transfer,which will have a negative impact on the company.why do they prefer this approach?What are the risks and economic consequences of this choice?These are pressing issues must be analyzed.Therefore,the motivation and economic consequences of the controlling shareholder’s equity pledge are worthy of further study.Based on this,this paper selects MJNY,the listed company with the highest proportion of equity pledge in the coal industry,as the research object,focuses on the equity pledge behavior of its controlling shareholders.On the basis of sorting out the relevant literature on equity pledge,this paper combines Principal-agent Theory,Signal Transmission Theory and Information Asymmetry Theory,uses case analysis method to analyze the real motivation of MJNY’s controlling shareholder for equity pledge,and combines Event study,Tobin’s Q and Entropy method make an in-depth analysis of the economic consequences of equity pledge.The research found:First,in terms of motivation,the controlling shareholder of MJNY initially pledged equity to raise funds to support its development on the basis of maintaining control,however,with the continuous increase of the proportion of equity pledge,the motivation of the controlling shareholders to usurp their interests is enhanced.Second,in terms of economic consequences,the high-frequency and large-scale equity pledge by the controlling shareholders of MJNY have brought many adverse economic consequences to the company.Through the capital flow,it can be found that the funds raised by the controlling shareholders of MJNY through equity pledge flow to themselves and the listed companies,which may lead to the risk of benefit encroachment.From the perspective of short-term market effects,the equity pledge is a negative signal to the market,leading to the abnormal fluctuation of MJNY’s stock price;from the perspective of company performance,the behavior of equity pledge has a negative impact on the comprehensive performance of MJNY;from the perspective of company’s value,the equity pledge has an adverse impact on the Tobin’s Q of MJNY,which eventually made MJNY face more serious financial risks.This paper puts forward relevant suggestions for companies,regulators and investors in order to prevent the potential risks of equity pledge,and at the same time to provide certain reference and warning for other listed companies with equity pledge.