A Study On The Influence Of Pledge Of Major Shareholders’ Equity On Company Value

Due to the imperfection of the capital market,it is a common phenomenon that the stock rights of listed companies in China are relatively concentrated.Therefore,the second kind of agency problem between large shareholders and small and medium-sized shareholders has been paid more and more attention by scholars.This problem can be attributed to the high separation of control and cash flow rights.The separation of the two rights causes the major shareholders to encroach on the listed company,such as related party transactions,illegal occupation of funds and other infringement on the interests of minority shareholders originated from this phenomenon.Nowadays,equity pledge is more and more widely used in the financing of listed companies.The other is that the major shareholders will not lose the control right of the company after the pledge of equity,but can still participate in the company’s production and operation decisions.Therefore,scholars have begun to pay more and more attention to this kind of financing.This paper also hopes to further explore the influence of major shareholders’ equity pledge on the value of listed companies through the case study of Meijin energy,and provide some Suggestions for investors and regulators.This paper firstly sorts out relevant domestic literatures,and finds that most of them believe that equity pledge aggravates the separation of control rights and cash flow rights,which leads to the second type of agency problem,which causes the major shareholders to have the motive of expropriation and damages the company’s value.Some scholars also believe that after the controlling shareholders pledge their shares,they will try to maintain the company’s performance in order to prevent them from being forced to liquidate their positions and lose control.Then,the core theory of this paper,that is,the agency theory,combined with the situation in China,specifically elaborated the second type of agency theory,but also elaborated other equity pledge related theories and concepts.Then the paper introduces Meijin energy and analyzes a series of agency problems caused by the separation of the two rights after the pledge of stock rights.In addition,EVA and Tobin Q values were used to evaluate the value of Meijin energy from December 2014 to December 2018,and the short-term effect of equity pledge was analyzed by event research method.Through the analysis,it is concluded that the equity pledge behavior of major shareholders of Meijin energy leads to the intensified separation of cash flow right and control right,which leads to the second kind of agency problem.From the perspective of the long-term value of the company,equity pledge does not reduce the value of the company;In the short term,the stock return rate of the company before and after the issue of equity pledge is generally lower than the normal return rate of the market.Finally,by case analysis put forward the proposal,due to the particularity of our capital market,should perfect the information disclosure system,regulators should also strengthen the supervision of the listed company’s equity pledge,at the same time,the major shareholders of listed companies should be enough to recognize the risks of equity pledge,through positive corporate governance to avoid the risk of equity pledge.