A Study On The Risk Of Controlling Shareholder's Equity Pledge

In our capital market,equity pledge can obtain large cash flow through leverage in the short term,which has won the favor of the actual controllers of listed companies.From the data of recent years,the scale of equity pledge is increasing year by year,and the proportion of equity pledge of a single enterprise is also increasing year by year,and the behavior of repeated pledge is also common,especially the controlling shareholder's equity pledge is more and more frequent.On the surface,the equity pledge behavior of the controlling shareholder is the personal behavior of the controlling shareholder to obtain the capital by using the equity held by himself,but because the capital flow can not be monitored by the majority of investors,the equity pledge behavior of the controlling shareholder has a potential adverse effect on the listed company.Influenced by the special position of the controlling shareholder in the enterprise,the volatility of the stock price and the sensitivity of the stakeholders to the pledge information,the negative influence of the pledge will be highlighted if the pledged equity is faced with the crisis of forced liquidation.On the one hand,the controlling position of controlling shareholders is threatened;on the other hand,companies and minority shareholders will also be affected.Therefore,this paper mainly studies the influence of controlling shareholder's high proportion equity pledge behavior on listed company,and explores the risk of controlling shareholder's equity pledge.Combined with the specific case company Baofeng Group,this paper analyzes the specific situation of the equity pledge,the motive of the equity pledge,the risk caused by the equity pledge and the preventive measures,starting with the behavior of the controlling shareholder's equity pledge.The main contents of this paper are as follows.Firstly,this paper introduces the background and significance of the selected topic expounds the research contents and methods.Secondly,this paper summarizes the theoretical basis related to the risk of equity pledge of controlling shareholders and the literature review related to the motivation,risk and preventive measures of equity pledge,and summarizes the views of previous scholars.Thirdly,this paper expounds and analyzes the institutional background,present situation and existing risks related to equity pledge in capital market.Lastly,this paper analyzes the relevant cases in detail.Firstly,it introduces the basic situation of the case company,the composition of the shareholders,the development of the enterprise and the specific situation of the controlling shareholder's equity pledge in Baofeng Group;secondly,it analyzes the motive and risk of the controlling shareholder's equity pledge,and puts forward some reasonable suggestions to prevent the risk and solve the risk.Based on the previous analysis,this paper summarizes the research conclusions.As a kind of financing behavior,the controlling shareholder's equity pledge can solve the short-term capital pressure to a great extent,but if it is too dependent on this financing method and excessive investment without restraint,it will inevitably bring the double pressure of operation and debt.Because Baofeng Group did not deal with the risk of controlling shareholder equity pledge,the company may be difficult to maintain.Therefore,an enterprise should first formulate a reasonable development strategy,so that the company's main business could focus,with the main business to drive the development of other related business,rather than early use of diversification strategy,resulting in a large but not strong business dilemma.Secondly,the corresponding financing planning should be done well,and the financing method of equity pledge can be applied to enterprises,but the scale and proportion of pledge should be standardized,and the early warning mechanism should be made for the possible pledge risk,which can not affect the normal operation of enterprises and investor sentiment because of the possible liquidation risk of equity pledge.