Equity Pledge And Financial Risk Diffusion In Enterprise Groups

Equity pledge can activate the rights and interests of controlling shareholders to a great extent,and this flexible advantage is favored by controlling shareholders.The use of equity pledge financing has also experienced explosive growth in recent years.However,with the sharp fluctuation of the stock market and the tightening credit environment in 2018,a large-scale stock pledge bursting crisis broke out in China's financial market.This economic consequence not only brings financial risks to the controlling shareholders and listed companies,but also affects other companies in the enterprise group through the innumerable connections of the enterprises in the group,which makes them face different levels of financial risks,i.e.the situation of financial risk diffusion.Starting from such vicious events,this paper chooses Shengda Group as a representative case to study the financial risk diffusion,and analyses the phenomenon of financial risk diffusion in enterprise groups caused by equity pledge.Through the analysis of the behavior of controlling shareholders' equity pledge,the economic consequences of equity pledge are extended to the enterprise group level.It is found that the behavior of equity pledge,as the trigger of financial risk diffusion within the group,will follow the path of financial risk diffusion within the group,and make the unilateral financing behavior of controlling shareholders evolve into a "time bomb" that can affect the whole group and give members within the group.Enterprises bring varying degrees of financial risk.This paper puts forward corresponding solutions to the problems in the case,and constructs the overall framework of enterprise group financial risk diffusion control.They are implemented in the following three aspects: Firstly,an early warning mechanism for financial risk of a single enterprise is established to effectively identify financial risk in the dynamic process of the daily operation of the enterprise,as the first to defense against financial risk.Secondly,we should improve the internal control system of enterprise groups,standardize business operations within the group,establish a strict authorization and approval system,and effectively control financial risks.Finally,isolate the financial risks that have occurred in the enterprise group to prevent the spread of financial risks.