A Study On Economic Consequences Of Controlling Shareholder's Equity Pledge

In order to broaden financing channels of the shareholders' and alleviate its'financing constraints,China's "Guarantee Law" and "Property Law" provisions that"legally transferable shares" could be pledged.Because of the equity pledge does not need other shareholder agree and without need the regulatory approval,the control rights and voting rights of shareholders pledge after shareholder equity is not affected by the shareholder equity pledge,the equity pledge is very popular by the shareholder in recent years,and developing rapidly in the A stock market.Research has also found that the controlling shareholder pledged equity stakes into financial difficulties,when the controlling shareholder is more likely to occupy the funds of listed companies,equity pledge will increase the separation of cash flow rights and control,weakening the incentive effect of controlling shareholders and strengthen the entrenchment effect,Reduce company value.On the other hand,the key factor of the equity pledge business is the share price.The volatility of the stock price in the A-share market is high.In order to control its own risks,the financial lenders(banks,securities companies,trust companies,etc.),to determine the benchmark pledge rate,and the warning line and the dispose line,when the stock fell to the warning line,the Financing party to inform the party involved in additional financing or early redemption of pledged shares,when the stock fell to open the line,The financial lenders will sell the stock or auction the stock in the secondary market.If it is the pledge of the controlling shareholder's equity,it will face the risk of transfer of control.A-share market has the value of shell resources and the control of private interests,controlling shareholders pledged a strong incentive to reduce the risk of transfer of control.Based on the unique institutional background of China,this paper uses A-share non-financial listed companies as the research object to test whether the controlling shareholder of equity pledge is the risk of Tunneling listed companies or avoiding the transfer of control rights and the possible economic consequencesl.The dissertation is composed of seven chapters and the content of each chapter could be outlined as follows:Chapter 1 chapter is the introduction of the thesis.This chapter introduces the research background,the motivation of the topic,the research content,the research ideas and the overall framework of the thesis,and finally introduces the innovation of the paper.Chapter 2 reviews the related literature about the controlling shareholder's agency cost and the controlling shareholder's equity pledge.Review domestic and foreign scholars on the controlling shareholder of the agency costs and the controlling shareholder equity pledge research results,based on the existing research,summarizes the limitations of research,theoretical research for this paper.Chapter 3 introduces the development of our country's equity pledge business and the relevant laws and regulations.Chapter 4 is the controlling shareholder's equity pledge and the cash holding level of the listed company.After the pledge of the controlling shareholder's equity,tunneling the listed company result to the cash holding level is reduced.On the other hand,the motivation for avoiding the transfer of control rights allows the listed company to hold more cash.This chapter starts from the two aspects of evacuation and avoiding the transfer of control right to explore the impact of the proportion of pledges of controlling shareholders on the cash holdings of listed companies and to further distinguish the proportion of shareholders pledging shareholdings in the nature of property ownership to the cash holdings of listed companies Whether the impact is different.Chapter 5 is the controlling shareholder's equity pledge and information disclosure quality.In order to maintain the share price,the controlling shareholder not only discloses more good news after the pledge of stock rights,but also conceals the bad news and time-selective disclosure information.Further,when the performance of the company is not good,the controlling shareholder will paint the performance of the company through earnings management,Affect the quality of corporate earnings,and increase the degree of asymmetric information.To further test analysts attention and the controlling shareholder of the pledge ratio of its moderating effect.Chapter 6 is the influence of the performance sensitivity of the controlling shareholder's equity pledge and executive compensation.This chapter,on the basis of executive pay---performance sensitivity,represents the level of corporate governance,examines the relationship between the controlling shareholder's equity pledge and company-executive pay-performance sensitivity,and explores whether executives and pledge of equity the collusion of controlling shareholders,and the pledge of controlling shareholder equity affect the executive compensation---performance-sensitive path.Chapter 7 summarizes the research conclusions of the dissertation,puts forward the corresponding policy suggestions and opinions on the basis of the conclusion of the study,and points out the limitations of the dissertation research.Through the empirical study,the main conclusions are as follows:(1)the proportion of controlling shareholders pledging shares with the cash holdings of listed companies showed a U-shaped relationship.When the proportion of controlling shareholder equity pledge is less than the critical value(55%),the holding level of listed cash is reduced due to the occupation of funds.When the proportion of controlling shareholder equity pledge is higher than the critical value,the controlling shareholder out of the risk of avoiding the transfer of control listed companies hold more cash.The relationship between the shareholding pledge ratio of controlling shareholders and the cash holding level of the listed company is U-shaped only exists in the non-state-owned enterprises.The lowering of the cash holding level of the listed company is caused by tunneling of the controlling shareholder pledged by the equity pledge.The increased cash holding is due to the reduction of capital expenditures and the decrease of cash dividends.Holding more cash can significantly reduce the possibility of the stock price touching the disposal line.The controlling shareholders' pledge of the equity pledges harms the value of the company's cash holdings.(2)The quality of information disclosure of the companies with the pledge of the controlling shareholder's equity is lower than that of the company without the controlling shareholder's equity pledge;the financial restatements,information disclosure violations and earnings management of the listed company pledged by the controlling shareholder are more serious,The pledge of controlling shareholders'shareholding deteriorates the information environment of listed companies,thus affecting the debt financing cost of listed companies.High analyst attention can inhibit the controlling shareholder of the pledge of equity on the quality of information disclosure of listed companies,and the higher the controlling shareholder equity pledge ratio,the lower the quality of information disclosure of listed companies.(3)The executive compensation of the listed company with the pledge of the controlling shareholder equity weak Pay---Performance Sensitivity,but this phenomenon exists only in the non-state-owned enterprises,and the increase of the executive compensation in the listed company pledged by the controlling shareholder is larger,And the companies with higher pay increases are more emptied and earnings management.Controlling shareholder equity pledge whether it is emptied of listed companies or out of avoidance of the transfer of control risks interfere with the financial decisions of listed companies to reduce the effectiveness of salary incentives and weaken corporate governance.Compared with the existing research,this paper makes some improvements and innovations in the following aspects:First,in the framework of analysis,the previous literature only focuses on one aspect of "tunneling" or "avoiding the risk of transfer of control rights" of the controlling shareholder of the equity pledge.In this paper,the two are included in the analytical framework at the same time,and the equity is analyzed comprehensively and systematically the influence of pledged controlling shareholders on listed companies doubles mutation.Second,the innovation of research perspective,the existing research on equity pledge focused on equity pledge will increase separation of two rights,controlling shareholders are more likely to be listed on the hollowing.The key factor of the equity pledge is the stock price.A few literatures discuss the stock price through earnings management after the pledge of the controlling shareholder,The level of disclosure,the quality of information disclosure,and the performance-sensitivity of executives---the study of the economic consequences of controlling shareholders pledge of ownership,this study expands the literature on the economic consequences of controlling shareholders pledge of equity.Third,based on the perspective of controlling shareholder's equity pledge,this paper expands the research on the influencing factors of cash holdings,information disclosure quality and executive Pay---Performance Sensitivity.