A Research On The Risks Of High Proportions’ Equity Plege For Oriental Garden Company

This paper takes Oriental garden company as an example.Firstly,review the research background,significance and related literature.Secondly,sort out the related concepts and characteristics.Thirdly,the management status of Oriental gardens and the equity pledge of Oriental gardens are analyzed.Finally,the risk causes of eastern gardens are analyzed and the corresponding Suggestions are given.Private enterprises are the core force of China’s future economic development and the main force of China’s future economic growth.However,private enterprises financing difficulties,high financing costs,financing risk is often said to be a new problem.As a new financing method,equity pledg has strong flexibility,high efficiency and convenience.Pledge of equity has become an important way of financing for private enterprises in China.However,the high proportion and frequency of equity pledge of private companies also bring risks to the companies themselves.Since 2012,when Oriental garden began to use equity pledge for financing,the proportion of controlling shareholders’ equity pledge has been rising,and the risks contained in equity pledge have been increasing,which eventually led to the company’s predicament.Based on the study of relevant theories,literature and the general situation of Oriental garden company,this paper analyzes and studies the deviation of control right and cash flow right.The pledge of equity of Oriental garden company is a continuous process.First of all,the purpose of equity pledge is to expand the business scale and supplement the capital chain of the company.Especially after the transformation of PPP projects,the demand for cash flow is increasing day by day.Secondly,the proportion of stock pledge continues to rise,resulting in the separation of control right of controlling shareholder and cash flow right,forming the risk of interest expropriation.Thirdly,with the increase of the separation of the two rights,the company’s profit encroachment leads to the decline of the stock price.Finally,the stock price of the company fell,which caused the stock pledge to close the position,and the company had to sacrifice other rights and interests to supplement the stock pledge guarantee.Finally causes the enterprise to fall into the development dilemma.