Motivation Of Controlling Shareholder's Equity Pledge,Investment Direction Of Pledge Funds And Company Performance

With the development of the economy,the company's shareholding structure has gradually changed from decentralized to more concentrated,and the controlling shareholder has begun to appear,which has also created a prerequisite for the emergence of equity pledge.Since 1995,equity pledges have entered China's capital market.Compared with other financing methods,the approval level of equity pledge is simpler and will not affect the control of the controlling shareholder.At the same time,due to the characteristics of convenient circulation and easy realization of equity,financing costs are lower,therefore,as an emerging financing method,equity pledge is being adopted by more and more companies,and the scale of equity pledge in the capital market is also expanding.Generally,as a normal financing behavior,equity pledge can help the controlling shareholders to get the required funds and promote the development of the company.However,if the controlling shareholders pledge their shares without restraint,it will not only affect the stability of the company's operation and management,but also affect the whole capital market.Based on this background,this paper decided to study the equity pledge of the controlling shareholder.This paper mainly adopts the case study method and selects the Great Town and ST Yinyi as the research objects to study the equity pledge of its controlling shareholders.First of all,on the basis of reviewing the existing literature at home and abroad,this paper summarizes and analyzes the existing research results from three aspects:the motive of equity pledge,the investment direction of pledge funds and the impact on the company performance,and introduces the current situation of equity pledge in China.Secondly,after a brief introduction to the two case companies,this paper analyzes the equity pledge behavior of the controlling shareholders of the case company from two aspects:the motivation of equity pledge and the direction of pledge capital investment,in order to explore the differences in the motivation and the investment direction of pledge funds of the case company.Finally,this paper analyzes the impact of controlling shareholder's equity pledge on corporate performance from two aspects:short-term market reaction and long-term performance change,and then summarizes the conclusions of this paper.It is found that the ownership structure of listed companies will have an important impact on the equity pledge of controlling shareholders,and controlling shareholders have stronger motivation of tunneling with the increase of ownership concentration.Through comparative analysis,it is found that under the influence of different motivation of equity pledge,the controlling shareholders will invest the pledged funds to different subjects,which leads to obvious differences in company performance.When the controlling shareholder invests the pledge funds to the listed company in order to meet its financing needs,it will usually improve the performance of the listed company,this kind of equity pledge behavior can be defined as the equity pledge under the "supporting mode".However,when the controlling shareholder invests the pledged funds to himself in order to encroach on the interests of the listed company,it will adversely affect company performance,this kind of equity pledge behavior can be defined as the equity pledge under the "tunneling mode".In order to better play the positive role of equity pledge,the following suggestions are put forward in this paper:First,the company should establish and perfect the mechanism of equity check and balance,and improve the internal governance system of the company.Second,the company should establish the risk management and control system of equity pledge and improve the information disclosure mechanism of equity pledge.Third,the relevant departments should strengthen the external supervision of equity pledge business and improve relevant laws and regulations.