Study On The Economic Benefit Of Equity Pledge From The Perspective Of Financial Elasticity

Equity pledge refers to the financing behavior of shareholders obtaining funds from Banks and other relevant financial institutions with their own company's equity as guarantee.With its unique characteristics of good liquidity and good liquidity,equity of listed companies has been accepted as pledge by many financial institutions.According to relevant laws and regulations,the equity pledge for controlling shareholders to bring money at the same time,its business decision-making rights has not yet affected,and its controlling shareholder stake after the pledge to the related financial institutions did not lose the right to vote,it seems that equity pledge financing way can help maintain its controlling shareholders holding status.Therefore,they are willing to choose equity pledge financing method.Although the special financing method of equity pledge has many advantages,if it is not controlled,the irrational use will also bring negative effects to some listed companies,such as :(1)affect the company's operating conditions.In order to avoid the default of equity pledge debt,the controlling shareholder may maintain the market value of the pledged shares by means of earnings management,but this move is likely to damage the interests of the listed company and thus affect the value of the company.(2)lead to the transfer of control of the company.When the major shareholders pledge the equity,they will separate the control right from the ownership right,which will reduce the cost of the major shareholders' infringement on the interests of the listed company and thus have a negative impact on the operation of the listed company.(3)damage the interests of listed companies and minority shareholders.The controlling shareholders will adopt the method of market value management to avoid the transfer of control right caused by equity pledge,but this method will probably damage the interests of listed companies.At the same time,the agency problem between major shareholders and minority shareholders will also increase with the increase of equity pledge ratio.(4)lead to stock price manipulation.Equity pledge increases the operating risk of the controlling shareholder.When the stock price continues to fall,the pledge party will require the controlling shareholder to call for margin or equivalent assets,and use its holding advantage to intervene in the company's operating governance to deliver benefits to itself.(5)moral hazard.After trading in the secondary market,participants in it can cause "moral hazard" through misconduct.The existing literature on equity pledge mainly focuses on the adverse effects on the pledged party,and there are few studies on the overall economic benefits of the pledged party and the pledged party.From the perspective of financial flexibility,this paper intends to illustrate the beneficial impact of equity pledge on parent-subsidiary companies.This paper selected the yuan health pharmaceutical group co.,LTD and its subsidiary method study,healthy yuan pharmaceutical group co.,LTD.Is a wholly owned subsidiary of day honest industry will be held by the group's stock to pledge,make health yuan group as a whole and jiaozuo financial flexibility to release,at the same time be the group's market reaction performance is good,are not affected by the bad.This shows that the pledge of equity has a positive impact on the economic benefits of the whole group,so that the equity structure can be optimized,the stability of enterprise value can be enhanced,and the economic benefits of the enterprise can be maximized.At the end of the paper,the prospect of future research is put forward.First of all,this paper studies the financial flexibility perspective of equity pledge economic benefits,but this article for equity pledge group,the company overall impact of the financial aspects of the economic benefits are more likely to be,so this article focus on the financial performance,and the economic benefits of generalized more inclined to input and output relation,so on this topic,the future can be further discussed.Secondly,this paper mentions that equity pledge has an adjustment effect on financial elasticity,but this effect is limited,and is affected by factors such as business purpose and capital structure.As for why it is limited,this paper does not discuss it due to the limitation of space,and future research can be conducted on this issue.