Research On The Causes And Economic Consequences Of Equity Pledge Of Baofeng Group’s Major Shareholder

Due to the limitation of traditional financing channels and the good liquidity of equity,equity pledge financing is highly regarded among Chinese enterprises under the current situation,and more and more enterprises frequently use equity pledge to raise funds.But at the same time,risks in all aspects after equity pledge are also gradually exposed.From 2017 to 2018,equity pledge has become the focus of attention due to the frequent occurrence of equity mortgage crisis in listed companies and the introduction of new regulations.Although in 2019,local state-owned assets entered the market actively to relieve the risk of equity pledge,the scale of equity pledge in China’s A-share market is still huge.Especially in the Internet and related service industries where asset-light enterprises are the majority,the ratio and market value of equity pledge are still high.Therefore,this thesis takes Baofeng Group,a private listed company in the Internet and related service industry,as a case to study the motivation and economic consequences of equity pledge of its major shareholder.Baofeng Group(300431),once a star company in the Internet and related service industry,set a record for rising by the daily limit 36 times in 40 days when it went public in 2015.It was called "monster stock" and was highly sought after by investors.Feng Xin,the major shareholder of Baofeng Group seized the opportunity and actively used equity pledge financing way to develop the company,to expand the business.What’s more,in order to promote his strategy of "global big DT entertainment",Feng Xin circularly pledged equity without hesitation(as of November 6,2018,equity pledge proportion reaches 95.35%,accounting for 20.35% of the company’s total equity).Since then,the stock price of Baofeng Group has been falling,and the company’s business operation has become increasingly bleak.In this process,it is worth studying what effect the pledge of shares of major shareholder has played.By introducing the governance structure of Baofeng Group and the process of pledge of major shareholders’ equity,the case specifically analyzed the motivation of pledge of major shareholders’ equity,and then explored the economic consequences of pledge of major shareholders’ equity to the company from two aspects of objective performance and corporate governance.Objective performance analysis was conducted from the perspective of corporate management,while short-term performance using the event study method and long-term performance using the financial indicators in the four capacity analysis framework and tobin Q.From the perspective of corporate governance,the case reanalysis deeply discussed the relationship between the pledge of large shareholder’ high proportion of shares and corporate governance from five aspects: the behavior of controlling shareholders,board governance,management governance,information disclosure and stakeholder governance.Finally,the conclusion was drawn that the high frequency and high proportion of equity pledge behaviors of major shareholder of Baofeng Group had a negative impact on the company’s operation and corporate governance,and Suggestions were given to prevent and defuse equity pledge risks from the perspective of listed companies and regulatory authorities.