Equity Pledge And Enterprise Value

The principal-agent problem has always been the focus of corporate governance.More and more scholars focus on the second agency problems.The second agency problem is mainly about that shareholders emptied companies to maximize their own interests due to the deviation between the controlling shareholder control and cash flow right.There are lots of ways that shareholders empty companies in taking advantage of control,such as related party transactions,guarantees,mergers and acquisitions,dividend policy,etc.For controlling shareholders of listed companies in China,equity pledge is becoming more common,from 380 of listed companies in 2011 to over a third of the number in 2015.Equity pledge phenomenon deserves further study.So,whether the equity pledge of shareholders can show that they want to empty companies?Firstly,the equity pledge of controlling shareholders intensifies the separation degree of control and the cash flow right.Secondly,the equity pledge of controlling shareholders is not the optimal way of financing,and the impact has a larger uncertainty.It shows that controlling shareholders have demand.Lastly,the controlling shareholders can master listed companies and have great influence on making decisions.It shows that controlling shareholders have the ability.When controlling shareholders of listed companies have tendency,demand and ability,we study on whether the enterprise value will be affected.Since the enterprise internal control supporting guidance launched on April 26th,2010,the internal control of listed companies is going to be the stage of mandatory disclosure.Internal control is starting to get regulatory oversight and external auditing.So a good internal control as internal mechanism of self adjusting and self constraints in production and business operation activities,has constraint effect on controlling shareholder behavior.This paper adds the quality of internal control as moderator variable to study the moderating effect on the relation between equity pledge of controlling shareholders and enterprise value.This paper,with A-listed companies from 2011 to 2015 in SSE and SZSE as samples,studies the influence on the enterprise value of listed companies according to the phenomenon of equity pledge of controlling shareholders.It also adds moderator variable to study whether the quality of equity pledge has the moderating effect.The empirical results show that,the equity pledge of controlling shareholders equity is negatively related with the enterprise value and the quality of internal control can restrain the negative relation between equity pledge of controlling shareholders and enterprise value.Finally,it puts forward policy suggestions according to the conclusion.