Research On The Impact Of Equity Pledge Of Controlling Shareholders Of Listed Companies On Corporate Value

With the characteristics of low financing cost,fast financing speed and flexible use of financing funds,equity pledge has been widely favored by major shareholders of listed companies.In recent years,equity pledge has occurred frequently in the capital market.By December 2021,more than 2500 listed companies in the A-share market had equity pledge,with a total market value of 4.18 trillion yuan.Although equity pledge is conducive to enterprise financing to a certain extent,the scale of equity pledge with long-term high frequency and high proportion of controlling shareholders will always have a certain impact on the operation and development of the company.The separation of control right and cash flow right will also lead to the decline of the value of the company.By analyzing the specific cases of equity pledge,this paper studies the impact of the controlling shareholder’s equity pledge of St noble company on the company’s value and the reasons for its impact on the company’s value,and summarizes the relevant enlightenment,hoping to bring some experience for the controlling shareholder’s equity pledge of Listed Companies in China’s A-share market,so as to promote the sustainable and healthy development of China’s capital market.This paper mainly adopts the case study method and selects st Guiren company,which has carried out a high proportion of large-scale equity pledge for five consecutive years from 2014 to 2018,as the research object.Since 2018,the company has suffered losses for three consecutive years and was warned of delisting risk in 2020.At the same time,St Guiren company belongs to the textile and garment industry,which ranks among the top 10 in the industry ranking of equity pledge proportion in 2021,and is well representative.Firstly,this paper determines the research points through the literature research method,collects and combs the relevant research results of scholars at home and abroad,and summarizes the relevant research theories and the definition of basic concepts.Secondly,with the help of the case study method,through the statistics of the equity pledge proportion in the A-share market and the equity pledge situation and pledge motivation of the controlling shareholders of St noble company,this paper focuses on the impact of the equity pledge behavior of the controlling shareholders of St noble company on the value of the company and the reasons for the impact on the value of the company.It is found that the impact of equity pledge on the company’s value mainly includes:(1)the high-frequency and high proportion of equity pledge by the controlling shareholders of St noble company will cause abnormal fluctuations in the company’s stock price and have an adverse impact on the company’s value in the short term;(2)Based on Tobin’s Q-value analysis,in the long run,the company value of St noble presents a downward trend after its controlling shareholders continue to pledge their equity;(3)When the pledge ratio is high,the company’s operating conditions will be affected and the book value of the company will eventually be weakened.Various phenomena confirm that the high-frequency and high proportion of equity pledge by controlling shareholders will have a great adverse impact on the value of the company.The reasons why the controlling shareholder’s equity pledge behavior of St noble company affects the company’s value can be summarized as follows:(1)under the highly centralized ownership structure of St noble company,the controlling shareholder’s equity pledge behavior will cause the serious separation of its cash flow right and control right,and eventually lead to agency problems;(2)St noble company’s lack of information disclosure on equity pledge has led to the negative attitude of the public and the market towards the company’s operation,which has become an important factor affecting the decline of the company’s value;(3)The controlling shareholder of St Guiren company has pledged its equity for many times to provide guarantee for the controlling shareholder himself and other major shareholders.Such behavior will undoubtedly convey the signal of bad operation of the company to external investors,resulting in panic of market investors and large fluctuation of the company’s share price;(4)Frequent equity pledge has a negative impact on the operating performance of St noble company,and the deterioration of the company’s operating conditions leads to more frequent equity pledge,which further worsens the company’s financial situation.According to the above research results,this paper obtains relevant enlightenment from four aspects: enhancing corporate governance ability,perfecting equity pledge system,restricting equity pledge behavior and perfecting relevant laws and regulations.