The Research On Market Effect Of Big Shareholder Equity Pledge

With the rapid development of the economy,Chinese enterprises are in a stage of rapid development and need a large amount of funds urgently.However,as the macro economy enter the “de-leverage” cycle as a whole,it is more difficult for enterprises to obtain funds and the cost of gaining funds increases.Equity pledge reduces the financing cost of enterprises.At the same time,equity pledge is favored by pledge parties because of the easy realization of equity and high liquidity.Therefore,equity pledge is becoming an increasingly common financing method.Equity pledge is different from public,private offering and debt financing.The market effect is different from other financing methods.However,the research on the market effect of equity pledge is still deficient.This paper starts from the fact that the investors in China's capital market are not completely rational.The listed companies with equity pledge in the above A shares are the research objects.This study focus on two questions: The first question is what kind of market effect will be generated by the equity pledge behavior of the major shareholders.The second question is what kind of influences the investor's sentiment,equity pledge scale and pledge period may have on market effect of equity pledge? Firstly,this paper draws on the BW sentiment index construction method,adds the subjective variable which is consumer confidence index,constructs the Chinese investor sentiment comprehensive index through principal component analysis.And calculates the cumulative excess return rate of the company in which the major shareholder pledge behavior occurs during the event window.The cumulative excess return rate is used as a proxy variable for market effects.Secondly,the relationship between investor sentiment,equity pledge scale and term and accumulated excess return rate has been studied.The conclusions of the study are as follow: equity pledge produces negative market effect;investor sentiment is significantly positive correlated with equity pledge market effect.There is a significant difference between the investor's sentiment and the market effect in the high and low periods of emotion.The pledge period is significantly positively correlated with the market effect;the pledge scale is significantlynegative correlated with the market effect.Finally,this paper proposes policy recommendations from the perspectives of regulators,investors,company managers and pledgee.The purpose of this research is to get the supervision department pay more attention to the equity pledge risk and establish a perfect equity pledge system to regulate the pledge behavior of major shareholders.Based on the fact that Chinese investors are not completely rational,this paper get the conclusion that the relationship between investor's sentiment and market effect of equity pledge,and provides a new perspective for the study of equity pledge.