A Study On The Relationship Between Controlling Shareholders' Equity Pledge,R&D And Firm Performance

In recent years,the equity pledge financing method has been enthusiastically touted by shareholders,and has gained vigorous development in China's capital market,especially the controlling shareholder's equity pledge behavior is more frequent.According to Wind statistics,as of October 2018,3,538 companies in the Shanghai and Shenzhen A-shares had equity pledges,accounting for 99.5% of the total number of listed companies,and the number of pledged shares has reached 642.795 billion shares,accounting for 10.01% of the total share capital.However,with the gradual expansion of the equity pledge,especially in the context of this year's market volatility,a group of stocks pledged by major shareholders are facing the risk of being closed.As of October this year,the market value of the equity that was suspected of hitting the liquidation line was 2,980.426 billion yuan.As an emerging financing method,the strong development trend of equity pledge has attracted the attention of the state,not only because the controlling shareholder may risk the “explosion” after the pledge of the equity,so that the control rights are transferred,but also the controlling shareholder plays a decisive role in the company's business decision-making and development direction.At present,China's economy is in an important stage of transformation and upgrading.China is now paying more and more attention to the leading role of technological innovation in economic growth.It can be said that whoever masters the core technology has gained inexhaustible development momentum.Therefore,China strongly encourages enterprises to carry out R&D innovation and increase R&D investment.The innovation activities of enterprises have become an important strategic layout for national economic development.After combing the relevant literatures at home and abroad,it is found that most of the research in the existing literature focuses on the risks arising from the equity pledge.Few scholars have linked the equity pledges to the research and development expenditures.Taking into account the high risk,high investment and long payback period of the company's R&D activities,the controlling shareholder may influence the R&D investment decision after the equity pledge.Therefore,based on the theory of principalagent theory and the private benefits of control rights,this paper starts from the perspective of equity pledge and verifies whether the controlling shareholder pledge will have an impact on the company's R&D expenditure,which in turn affects corporate performance.This paper selects the data of Shanghai-Shenzhen A-share listed companies in 2010-2017 as research samples,and uses empirical analysis methods to test the relationship between controlling shareholders' equity pledge,R&D expenditure and corporate performance,and proposes targeted policy recommendations based on the research conclusions.The results show that there is a significant negative correlation between the controlling shareholder's equity pledge and R&D expenditure.When the controlling shareholder's equity pledge ratio is higher than 60%,the controlling shareholder's equity pledge behavior will have a significant negative impact on corporate performance,and a high proportion of equity pledge behavior is intensified.The second type of agency problem has a negative impact on business performance.And the shareholder's private income for control will also change the company's major business decisions,and maximize the self-interest by suppressing the company's R&D investment.R&D expenditure plays a mediating role between the controlling shareholder's equity pledge and corporate performance.That is to say,the negative effect of controlling shareholder equity pledge on corporate performance is due to the reduction of R&D expenditure.Moreover,from the perspective of different property rights and different industries,the intermediary effect of R&D expenditure mainly exists in private enterprises and hightech enterprises.This paper deeply studies the impact mechanism of equity pledge on corporate performance,expands the research content related to equity pledge,and enriches the influencing factors of corporate R&D expenditure,and provides reference value for enterprises to rationally carry out equity pledge financing and carry out innovative research and development activities.