Research On The Motives And Economic Consequences Of The Pledge Of Controlling Shareholders’ Equity

Equity pledge is a kind of behavior in which shareholders of listed companies pledge their shares to financial institutions as collateral and financial institutions lend funds to shareholders.Equity of listed companies is a kind of liquid assets,easy to be accepted by financial institutions,and equity pledge has few restrictions,low threshold,simple procedures,and is welcomed by shareholders of listed companies.After equity pledge,shareholders lose the cash flow right of corresponding shares,but still enjoy the voting right of corresponding shares,resulting in the separation of control rights and cash flow rights,which will lead to the contradiction between controlling shareholders and minority shareholders.When the stock price falls,the controlling shareholder may infringe the interests of the listed company and the minority shareholders in order to cover the positions,and these behaviors will also affect the value of the listed company.When the stock price continues to fall and the controlling shareholder is unable to supplement the pledge,the controlling shareholder will lose control and affect the normal operation of the listed company.Under the bear market,the stock prices of listed companies generally fall,and the above situation is likely to occur in a large range,causing financial market turmoil and affecting the normal operation of the national economy.Therefore,it is still worth further study to explore the economic consequences of equity pledge by controlling shareholders and how to prevent the risk of equity pledge.Based on the theory of information asymmetry,principal agent theory and signal transmission theory,this paper adopts the case study method and selects Feima International,which was forced to close its positions in the A-share market in 2019 and attracted wide attention,as the research object to analyze the motivation and economic consequences of controlling shareholders’ equity pledge.This paper studies the relevant data of listed companies from 2014 to 2019,and finds that the controlling shareholder’s equity pledge has the motivation to supplement the cash flow of listed companies and maintain the control rights of listed companies.In the case of falling stock prices,the controlling shareholders have implemented a series of encroachment behaviors for their own interests,which have caused a lot of impacts on the minority shareholders and the listed companies.First,after the controlling shareholder’s equity pledge,the degree of separation between the two rights will increase with the increase of the proportion of shareholders’ pledge,leading to the second type of agency problem.The controlling shareholder may encroach on the interests of small and medium shareholders and the listed company through illegal guarantee,related transactions,fund embezzlement and other behaviors.Second,through the event study method,it is found that the equity pledge behavior of the controlling shareholder will cause the negative reaction of the small and medium investors,and the investors will recognize the negative impact of the equity pledge to some extent.Thirdly,based on the analysis of Tobin’s Q value,it is found that all kinds of embezzlement behaviors of controlling shareholders after the equity pledge have a negative impact on the enterprise,leading to the decline of the value of listed companies.Fourthly,when the stock price of the company falls and the controlling shareholder cannot supplement the pledge,the controlling shareholder will lose the control right of the listed company and affect the normal operation of the company.Finally,according to the above research conclusions,corresponding suggestions are put forward,including improving the information disclosure system,improving the internal control system,appropriately restricting the voting rights of shareholders after equity pledge,and improving the risk awareness of shareholders and external financial institutions.