Study On The Economic Consequences Of The Pledge Of Controlling Shareholders’ Equity

Equity pledge refers to the financing behavior in which shareholders hold their stocks to financial institutions such as securities companies to obtain liquidity.In recent years,the equity pledge of controlling shareholders of private listed companies is particularly frequent,and equity pledge has the advantages of broadening financing channels,easy realization and high liquidity for listed companies.Empirical studies have shown that the controlling shareholders of private enterprises will have stronger incentives to improve the company’s operations,improve performance,and stabilize the stock price after the equity pledge,but is this really true? Against the backdrop of the decline in the stock indexes of the Shanghai and Shenzhen stock markets since 2018,the stocks that have been pledged by controlling shareholders have hit the liquidation line and caused passive reductions in stocks.Based on the theory of principal-agent and information asymmetry,this paper uses the research method of case analysis to select the private equity listed company in the real estate industry with the highest proportion of equity pledge in A-share market in 2018 as the case company,mainly for 2014.By 2018,the analysis of the equity pledge data of the controlling shareholders and their concerted actors will be conducted.According to the research ideas of asking questions-analysing problems-solving problems,the reasons for the frequent stock pledges of controlling shareholders will be studied and the economic consequences will be analyzed.The study found that: First,the controlling shareholder of Yinyi shares conducts equity pledge for the short-selling company and the motive for the interests of small and medium-sized shareholders.Second,the reaction of the stock market to this behavior after the company issued the equity pledge announcement is negative;Third,after the controlling shareholder pledges the equity,the company’s operation is not optimistic.Fourth,the equity pledge behavior leads to a decrease in the value of the company based on Tobin’s Q value.Fifth,the company’s share price collapse risk increases after pledge.Proposing for the research results: The proportion of equity pledge of the company’s controlling shareholders should be reduced.The company should improve the internal control system,raise awareness of risk prevention,actively expand financing channels,and prudently diversify operations.Most of the literature on the existing equity pledge in China adopts the method of empirical research and normative research.Less scholars use case study to analyze the economic consequences of the equity pledge of controlling shareholders.This paper adopts the case study method for the equity pledge of Yinyi Shares.More typical private listed companies conduct in-depth analysis and draw conclusions for the reference of other listed companies of the same type,in order to play a certain role in the steady development of China’s capital market and system improvement.