Analysis On The Motivation And Economic Consequences Of Controlling Shareholders’ Stock Pledge

Since the reform and opening up,the economy in our country has developed speedily,and now China tends to step in high-quality development.China has continued to promote the transformation and upgrading strategy policy for traditional industries,and forcefully supports emerging industries.At the same time,more and more innovative private enterprises have appeared,injecting vitality into the capital market.For private enterprises,with a view to achieving long-term development,there must be sufficient fiscal support,but the complex and expensive financing has been the sore of these enterprises.Even if private enterprises run well and complete the listing work,the channels of equity financing are still relatively narrow.moreover,it is more difficult to solve the funding gap by issuing corporate bonds because of the small extent of financing.With the backdrop of the epidemic,the global economy continues to decline.At the same time,under the influence of the national policy of "three cuts,one reduction and one subsidy",financial institutions have taken the initiative to reduce the amount of loans,and the supervision of financial products has become increasingly strict,making it more difficult for private enterprises to raise funds.Therefore,in the current economic situation,it is still a long way to change the financing difficulties of private enterprises.This paper takes Semir Apparel and ST Noble as case companies,firstly sorts out the equity pledge of stock rights of process of the two listed companies,and finds that the equity pledge of ST Noble’s controlling shareholders has the characteristics of high proportion and high frequency.On the contrary,the equity pledge of the controlling shareholders of Semir Apparel has the features of low ratio and low frequency.Then,the article studies the major motive of equity pledge in the two case companies,analyzes the change of the shareholding ratio,the comparison of KZ index and the degree of separation of the two powers and other angles,and later finds that the main motive of the controlling shareholders of ST Noble is to occupy the interests of minority shareholders while the main motive of Semir Apparel is to achieve the financing needs of its company.Then,from the perspective of stock price change and investment strategy,this article studies the entrenchment effect and alignment effect of controlling shareholders’ equity pledge under different aims.Finally,the article resolves the economic consequences brought by the equity pledge behavior of the controlling shareholders of the two cases,under the aspects of liquidation risk,short-term market reaction,financial risk and long-term financial performance.Major research findings of this thesis include:First of all.the difference in the controlling shareholder’s pledge motive will lead to different economic consequences.From the perspective of short-term economic consequences,with the issuance of the announcement of the equity pledge of ST Noble controlling shareholders,the market has a certain reaction to this,that is,the share price fell after this way of pledge behavior.Investors reacted negatively to the equity pledge of ST Noble,while Semir Apparel showed in the pledge announcement that the funds would be used for financing.Five trading days later,its stock price exhibited an upward trend and an excess return,indicating that investors recognized this way of equity pledge by Semir Apparel’s controlling shareholders.Secondly,from the viewpoint of liquidating risk and financial risk,the pledge behavior of controlling shareholders who keep an embezzlement motive is characterized by high proportion and high frequency.Many transactions reach the liquidation line and Z value continues to fall,so the company is faced with serious liquidating risk and financial risk.On the other hand,the pledge behavior of controlling shareholders mainly based on financing motive is characterized by low proportion and low frequency.The equity pledge transaction does not reach the warning line,and the Z value is higher than the high critical value,then at this time,the liquidation risk and financial risk are low.Finally,from the outlook of long-term financial performance,with the motive of occupation,the debt-paying ability,operation ability and profitability of the controlling shareholder’s equity pledge are all exposed to different levels of decline.Compared with the way of equity pledge that is mentioned before,the debt paying ability,operation ability and profitability of the equity pledge with a stable motivation of financing,show a flat or growth trend.Based on the above situation,this thesis produces some suggestions:1.Improve the internal management and information disclosure mechanism of listed companies.2.Regulatory authorities should strengthen supervision and raise the violation cost of equity pledge.3.Minority shareholders and creditors shall fully exercise their supervisory rights.