| In recent years,share pledge financing has become a normal in China's capital market.According to China Securities Registration and Settlement Corporation,as of Augut 24,2018,there were 3465 stocks in stock markets of Shanghai and Shenzhen involving share pledge,and the total ratio of A share pledge is as high as 10.36%,and China's capital market has formed a phenomenon of "no share and no pledge".However,with the overall collapse of the stock market in 2015,a number of listed companies have almost changed their ownership because the share pledge touched the "cordon" or even the "flat warehouse line",and triggered the largest "suspension wave" in the history of A-shares.Share pledge alarm sounds frequently,which has caused regulators,practitioners and theorists to think deeply about the potential crisis under the prosperity of share pledge and its prevention and control measures.Share pledge is essentially a kind of financing leverage operation of credit expansion.Shareholders,as pledgers,use their share as security to apply for loans to banks,securities firms,trust and other financial institutions or provide loan guarantees for third parties.Therefore,the "static" share deposited on the balance sheet by the shareholders through the pledged share into "dynamic" available capital,which is a financial strategy to change"economic stock" into "economic momentum".Compared with other financing methods,share pledge financing is favored by controlling shareholders and financial institutions because of its flexibility and convenience.Especially in the "bull market",share pledge financing can raise more funds,which greatly stimulates the desire of controlling shareholders for share pledge.Share pledge is originally the personal behavior of the controlling shareholder,which is a kind of financing leverage operation of credit expansion.The status of the controlling shareholder makes it related to the operation and finance of the company.The guarantee function of share pledge is derived from the value of equity.The valuation level of the stock market determines the value of the pledged share,and will inevitably have an impact on the decision of the controlling shareholder.However,because the capital market is not completely effective,the stock price does not reflect the information of the past,the present and the future,and the investors' expectation is influenced by the limited rationality,which often causes the stock price to deviate from its intrinsic value,showing "overvaluation" or "undervaluation",that is stock mispricing.As a rational economic person,in order to maximize their own interests,whether the controlling shareholders have made use of the low efficiency of the capital market and dynamically adjust their share pledge decisions according to the valuation level of the stock market.If the share pledge decision-making of controlling shareholders make use of the inefficiency of the capital market,how does the controlling shareholder realize it?For the controlling shareholders,the stock price slump is a catastrophic disaster,which not only causes significant loss of their personal wealth,but also may lose their controlling position.How will the controlling shareholder act to reduce the risk of stock price fall?Under the background of "high leverage" and "high debt",it is of great significance for"deleveraging" and "risk prevention",maintaining the stability of the financial and social order and improving the efficiency of the allocation of market resources to explore the relationship between the share pledge behavior of the controlling shareholders and the mispricing of the capital market.Based on the realistic background of risk highlighting under the prosperity of share pledge in China's capital market,and based on the discussion of the motivation and economic consequences of controlling shareholders' share pledge,this paper examines the impact of mispricing in capital market on the decision-making of controlling shareholders'share pledge from the perspective of external environment,analyzes the means and methods of how the controlling shareholders of the listed companies make use of the inefficiency of the capital market to dynamically adjust their share pledge decisions,explores the relationship between controlling shareholders' share pledge and stock price collapse risk under market value management motivation,and puts forward policy recommendations to improve the information efficiency of capital market and prevent the risk of equity pledge from the perspective of external supervision and internal governance.The following conclusions are drawn:Firstly,the decision-making of the controlling shareholders' share pledge exists the market timing motive by using the low efficient capital market.Specifically,the controlling shareholders dynamically adjust their share pledge strategy according to the valuation level of the stock market in order to maximize their own interests.Empirical research shows that,when the stock price is overvalued,the controlling shareholder's willingness to pledge is obviously strengthened,and the scale of pledge is enlarged;On the contrary,when the stock price is undervalued,the controlling shareholder's willingness to pledge shares is significantly weakened and tends to reduce the size of the pledge.Meanwhile,the credit market environment is also an important factor for controlling shareholders' share pledge decision-making.The credit market environment determines the financing scale and financing cost of controlling shareholders'equity pledge,and controlling shareholders will adjust their equity pledge decision according to the changes of credit market environment.However,when the company is faced with high financing constraints,the market timing motivation of the controlling shareholder's share pledge is obviously weakened.Secondly,due to the volatility of stock price,the controlling shareholder has a strong incentive to control the surplus in the process of share pledge,which keeps the company's stock price at a relatively high level.However,with the continuous improvement of accounting standards and the improvement of investor protection,as well as the continuous improvement of bank credit approval procedures and other external regulatory environment changes,the listed companies with controlling shareholders' share pledge reduce the accrued earnings management,and then turn to manipulate earnings through the real earnings management.Because of the inefficiency of China's capital market,investors can not effectively identify the earnings information disclosed by the listed company,which makes investors mispricing the company's earnings and leads to the stock mispricing.In the process of share pledge,the earnings management activities implemented by the controlling shareholders on the one hand release more noise information at the company level into the market and reduce the stock price synchronously.On the other hand,in order to cover up their earnings management behavior,the controlling shareholders will intentionally reduce the transparency of the company's financial information and conceal the company's real earnings information,which makes the stock price synchronization improve.However,the effect of noise information released by earnings management on stock price synchronization is greater than that of reducing financial information transparency to improve the stock price synchronization.Therefore,the overall survey of earnings management activities reduces the company's stock price synchronicity.In other words,noise information plays a leading role in China's securities market,and the stock price synchronization mainly reflects the amount of information noise rather than information efficiency of China's securities market,which is consistent with the characteristics of China's emerging markets.Therefore,controlling shareholders tend to pledge share when the stock price synchronization of the company is low.Manipulating earnings to reduce the stock price synchronization is an important way for controlling shareholders to make use of the inefficiency of the capital market to achieve market timing in the process of share pledgeThirdly,During the period of share pledge,the risk of stock price collapse is lower for the listed companies with the share pledge by controlling shareholders.For controlling shareholders,the risk of stock price crash is tantamount to a devastating catastrophe,which will not only make their personal wealth suffer heavy losses,but also may make them lose their controlling position.Therefore,the controlling shareholders have the motivation and ability to conduct market value management to stabilize the company's stock price and then reduce the risk of stock price collapse during the pledge period.However,the controlling shareholders do not manage the market value by trying to improve the company's performance,but by manipulating earnings to manage the market value.Although this short-term opportunism by controlling shareholders can also achieve the purpose of market value management,but the expedient measure just for "demining" is like drinking poison to quench thirst.When the stock price is higher than its intrinsic value,it shows that there is a bubble component in the stock price,which reflects more bad news.When the bad news is hoarded to a certain extent and suddenly erupts,it will lead to sharp fluctuations in the company's stock price,and the risk of stock price crash will increase significantly.The long-term lack of endogenous motivation for market value management in China's stock market is the root of the tendency of listed companies and their insiders to act in a short-term opportunistic way.Fourthly,in order to make full use of the financing method of share pledge and improve the security of the secured creditors' rights,this study puts forward some policy suggestions on the risk prevention of share pledge:firstly,improve relevant laws and regulations,safeguard the authoritative effect of laws and regulations;secondly,properly raise the threshold of pledge,establish market value management system;third,improve the corporate governance mechanism,strengthen external audit supervision;fourth,strengthen the information disclosure system,pay attention to credit evaluation mechanism.The contributions of this study are as follows:Firstly,from the perspective of asset mispricing,this study discusses the basic logic of controlling shareholders' share pledge decision-making,and points out that in order to maximize their own interests,the decision-making of controlling shareholders'share pledge is in utilizing the inefficient of capital market,and the strategy of share pledge is dynamically adjusted according to the valuation level of the stock market and the credit market environment,but which is affected by the level of corporate financing constraints.This study not only enriches the literature research on the motivation and influencing factors of the controlling shareholder's share pledge,but also confirms that the capital market is not completely effective.As an"anomaly" in the capital market,asset mispricing will lead to the failure of market resource allocation function and distort the company's investing and financing behavior.Secondly,based on the fact that the decision-making of controlling shareholders' share pledge is in utilizing the inefficient of capital market,and the pledge strategy is dynamically adjusted according to the valuation level of stock market and the credit market environment,it find that controlling shareholders have strong motivation to manipulate the disclosure of earnings information in the process share pledge,and use the inefficiency of China's capital market to induce investors to overestimate the value of the company,so as to raise the stock price.Moreover,with the tightening of external regulatory environment,controlling shareholders have reduced the accrued earnings manipulation and turned to real earnings manipulation.The earnings management activities carried out by controlling shareholders not only reduce the special information of the company but also release more noise information at the company level.The noise information contained in the stock price increases while the real information decreases,which makes the investors misvalue the earnings of the company and then misprice the stock,and the stock price synchronization of the company decline.Controlling shareholders tend to pledge their shares when the stock price synchronization is low,which is an important way for controlling shareholders to reduce the stock price synchronization by manipulating earnings information disclosure.This study also confirms that China's capital market is a noisy market,and stock price synchronization will positively reflect the information efficiency of the capital market.Thirdly,from the perspective of market value management,this study analyzes the measures taken by controlling shareholders to prevent stock price collapse and avoid liquidation or even transfer of control rights during the period of share pledge,and finds that controlling shareholders do not manage the market value by improving the company's performance,but by manipulating earnings.Although this short-term opportunism of controlling shareholders can also achieve the purpose of market value management,but only for the "demining" of expedient measures,is tantamount to drinking poison quenching thirst.Earnings management can make investors misvalue earnings and then misprice stocks.The risk of stock price collapse is caused by the stock price deviating from its intrinsic value seriously.This study reveals the way in which the controlling shareholders manage the market value for demining during the pledge period,and also finds that asset mispricing is the inherent cause of stock price collapse risk.Due to the lack of endogenous motivation of market value management in China's stock market for a long time,controlling shareholders,as rational economic people,have adopted short-term opportunistic behavior in market value management. |
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