Study On The Risk Of Equity Pledge Of Listed Companies And Preventive Countermeasures

Stock pledge began in the downturn of the stock market in 2010.In 2013,the introduction of the "Stock Pledged Repo Trading and Registration and Settlement Business Measures(Trial)" marked the first time that the innovative business of stock pledged repo reached the historical stage.Owing to its low financing cost,equity pledge became a “weapon” for financing.According to the data of China Securities Depository and Clearing Co.,Ltd.,as of November 08,2019,the total market value of A shares pledged was 2.91 trillion yuan,accounting for 5.24% of the total market value;a total of 1980 listed companies in A shares held equity Pledges,of which,70 listed companies’ equity pledge ratio exceeds 50%,348 listed companies’ equity pledge ratio is between 30%-50%,808 listed companies’ equity pledge ratio is between 10%-30%,and 754 companies are listed The company’s equity pledge ratio is less than 10%.This shows that equity pledges are becoming more common.This common behavior also brings risks.In order to study the risks posed by equity pledges,after reviewing the existing literature,this article first explains the concepts and characteristics of equity pledges,and then delves into the relevant theories of equity pledge risks and risk management.Taking Huayi Brothers as a case study,it analyzed and studied the equity pledge risks and prevention of Huayi Brothers,and obtained enlightenment on how to prevent the risks brought by the controlling shareholder’s equity pledge.From the perspective of the pledger,it puts forward countermeasures against the risks of equity pledge of listed companies.The author believes that both the pledgee and small and medium shareholders should raise awareness of risk prevention,and the pledgee should take the initiative to prevent risks.At the same time,the author believes that increasing supervision of listed companies is a key measure to prevent equity risks.Through research,this article draws the following conclusions: First,the essence of equity pledge is a financing tool.This financing method,which will not dilute shareholders’ equity,but also can quickly bring a large amount of liquidity,is bound to develop very quickly.Second,equity pledges bring risks to the company as well.Equity pledge first transfers the equity risk to the pledgee;second,equity pledge will exacerbate the separation of cash flow rights and control rights,and the agency problems caused by this will harm the interests of small and medium shareholders;finally,when the stock price falls beyond the liquidation line At this time,the controlling shareholder faces the risk of losing control.Third,the risk conflict between the pledgee,the pledgor,and the small and medium shareholders needs to be mitigated through the regulatory agency’s regulation of the pledge of equity in listed companies.Strong external supervision and management can enable the three to achieve common interests maximize.Fourth,equity pledge risk occurs at the moment when the equity pledge becomes effective,and disappears after the controlling shareholder redeems the equity.That is to say,the prevention of equity pledge risk must begin before the equity pledge behavior and run through the entire equity pledge process,and afterwards,a systematic analysis of the equity pledge risk should be conducted to gain experience and inspiration.