Analysis Of The Impact Of Large Shareholders’ Pledge Of Stock Rights On The Value Of The Company

In recent years,as a way of financing,pledge of Stock Rights is being widely used,because of its convenience,liquidity of pledged objects,and the characteristics that do not affect shareholder control.However,due to its late implementation in China,the relevant systems have not been perfected,and equity pledges also conceal greater risks,especially for companies with high pledge ratios.At present,the scale of equity pledge in the A-share market is increasing rapidly,and the thunder-hit incidents are constantly emerging.Therefore,it is of great practical significance to study the impact of equity pledge behavior on the value of company value.This article selects the "China version OF ZARA" Shanghai La Chapelle clothing co.,LTD as the object of study,which has recently suffered defaults on equity pledge.In September 2017,La Chapelle listed on the main board of the Shanghai Stock Exchange.Two months later the company’s actual controller,controlling shareholders began to pledge their shares out,and in the past two years the company’s performance has seriously declined,the market value plummeted,the real controller finally pledged to burst the position.This paper starts with the relevant research on the motivation and influence of pledge of stock rights,and analyzes the case on the basis of combing and analyzing the relevant theoretical literature.Event study,Tobin’s Q value,and financial index analysis method were used to analyze the changes in the company’s value after the pledge of the equity of the major shareholder of La Chapelle.At the same time,the controlling shareholder’s controlling right and cash flow right before and after the Pledge of Stock Rights are analyzed,and combined with the company’s related business behavior,the mechanism affecting the value of the company is explored,and found that the Pledge of Stock Rights deepens the separation of the two rights,and leads to theshareholder’s interest invasion motive,further supporting the conclusion that the company’s value is declining.In view of the above conclusions,the relevant suggestions are put forward from the perspective of companies,financial institutions and laws and regulations.Through the study of this case,this paper finds that the way of major shareholders to influence the value of the company is very diverse and hidden,especially for the controlling shareholders,the financing method of Pledge of Stock Rights appears to be convenient and insufficient.It is suggested to limit the voting rights of major shareholders after the Pledge of Stock Rights,to introduce the rights holder to the supervisory board of the company,strengthen the function of independent directors,strengthen the risk assessment of the claims of financial institutions,strictly disclose the specific use of the pledge funds and limit the frequency and proportion of the Pledge of Stock Rights of a single shareholder,and strengthen related party transaction information disclosure.It is hoped that the company and financial institutions can pay attention to the large shareholder’s Pledge of Stock Rights behavior,and this paper could make some contributions to the improvement of the details of the Pledge of Stock Rights system.