Huanrui Century Equity Pledge Financing Risk Research

Equity pledges,as one of the most important financing tools for companies to quickly obtain the required funds,have been known and frequently used by many listed companies.However,the phenomenon of pledges that expire but cannot be redeemed often occurs,and this concentration of maturities that are difficult to repay not only hides various risks,but also has a certain impact on the market,especially in the film and television industry.We should not only think of equity pledge financing as a low-threshold financing method that allows companies to obtain the required funds quickly,but also correctly perceive the risks behind it.Therefore,it is a sustainable proposition to study the equity financing cases of listed companies in the film and television industry,analyze and identify the impact mechanisms of their risks,and explore how to effectively control the risks.In this paper,a representative listed company in the film and television industry,namely,Huanrui Century,is selected as a case study object.First,the relevant research results of equity pledges at home and abroad are organized and summarized,and after sorting out the relevant concepts and theoretical contents,three paths of equity pledges affecting corporate financing risks are clarified;then,starting from the current situation of equity pledges in China and the basic situation of the case company,the overall pledge status,the structure of the segment in which it is located and the types of pledging parties are introduced respectively;then the comparative analysis method and the event study method are adopted to The case companies are then analyzed and studied using comparative analysis and event study methods.This part of the study analyzes in detail the measurement of the financing risk of Huanrui Century based on the F-score model,and analyzes the results of the corporate financing risk index as well as the business performance;calculates the degree of separation of two rights,and compares and analyzes the separation of cash flow rights and control rights before and after the stock pledge;and analyzes the stock price volatility before and after the stock pledge using a regression model.The case study shows that Huanrui Century uses equity pledges to finance the company’s investments,but there is pressure to repay the loan due to investment losses,and frequent pledging of a high percentage of equity will increase the degree of separation of control and cash flow rights,as well as increase the volatility of the company’s stock price.In addition,when the equity pledge ratio is high,and the share price falls,the company lacks shares that can replenish the pledge,and it is difficult to repay the loan to the pledgee,resulting in a liquidity situation.In general,frequent equity pledges of listed companies increase the financing risk.Finally,based on the understanding and analysis of the case,suggestions are given from the aspects of corporate strategic direction,internal governance mechanism and external regulatory system,in order to provide a reference experience for the equity pledge financing in China’s listed companies in the future,to regulate the equity pledge financing activities of listed companies,so as to reduce the risk of equity pledge financing and to promote the sustainable development of the financing securities market.