The Impact Of Shareholders' Equity Pledge On The Performance Of Listed Companies

Major shareholders have always been the focus of academic research.Major shareholders play a dual role in corporate governance.Their existence can not only alleviate the first type of agency problem,but also aggravate the second type of agency problem.Different from the European and American capital markets,there are controlling shareholders behind most listed companies in China.Due to China's legal environment and investor protection mechanism,it is very common for major shareholders to take advantage of many means to encroach on the interests of small and medium shareholders.The interests of small and medium shareholders in China are difficult to preserve.This paper is based on the perspective of the second type of agency problem between the major shareholder and the minority shareholder,and studies the financing behavior of the major shareholder – the economic consequences of the equity pledge.As an emerging financing method,the equity pledge has emerged as the “funding tool” favored by the major shareholders of listed companies since it appeared in China's capital market.The equity pledge business of China's A-share market has been increasing year by year.At this stage,it has almost reached the situation of "no shares without pledge".In the situation of non-being,the surge in equity pledge business has brought great impact to China's capital market and even listed companies themselves.What are the consequences of the pledge of the major shareholder's equity,and can the corporate governance mechanism play a corresponding role in controlling the equity pledge? This is undoubtedly a matter of great concern to both investors and regulators.This paper takes China's Shanghai and Shenzhen A-share main board listed companies from 2013 to 2017 as a research sample,and studies the impact of major shareholders' equity pledge on the performance of listed companies based on the perspective of agency problems caused by major shareholders.we further explore whether the three supervisory mechanisms of creditors,institutional investors,and dividend policies can exert a governance effect on the equity pledge behavior of major shareholders,and effectively restrain the impact of the agency problem caused by the equity pledge of major shareholders on company performance.The conclusions of this paper are as follows:(1)The relationship between the pledge of the major shareholder's equity and the performance of the company is negative.The agency problem caused by the pledge of the major shareholder's equity will damage the performance of the listed company;(2)The creditor supervision mechanism can effectively reduce the damage to the company's performance caused by the pledge of the major shareholder's equity and play a corresponding governance effect.However,the creditor's debt period will affect the governance effect of the creditor's supervision mechanism on the major shareholder's equity pledge.Compared with the long-term borrowing,the short-term loans issued by creditors can effectively exert the governance effect and reduce the negative impact of the major shareholder's equity pledge on performance;(3)The company's dividend policy can effectively reduce the damage of the major shareholder's equity pledge to the company's performance,and play a corresponding governance effect;(4)Institutional investors can not weaken the negative impact of the major shareholder's equity pledge on the company's performance,and fail to exert the expected governance effect of the major shareholder's equity pledge.This shows that institutional investors can not form a comprehensive and effective supervision on the self-interested behavior of the major shareholder,and restrict the behavior of the major shareholder that damages the interests of the company and small and medium shareholders after pledge.The innovations of this paper lie in:(1)Few papers have dealt with the governance of equity pledge.From the perspective of corporate governance,this paper empirically examines whether the three supervisory mechanisms of creditors,institutional investors and dividend policy can change the impact of the pledge of large shareholders' equity on corporate performance.(2)We further classify the debts issued by creditors into long-term and short-term debts,and empirically test whether long-term debt and short-term debt can have different governance effects on the equity pledge behavior of large shareholders.