Research On The Motivation And Effect Of Equity Pledge Rescue In Pharmaceutical And Biological Industry

As a fast and efficient financing method,equity pledge is widely used,and there was a situation of "no stock without equity pledge" in the market.In 2018,the trade friction between China and the United States,coupled with the new domestic regulations on equity pledge,caused severe fluctuations in stock prices,and the equity pledge explosion caused severe turbulence in the financial market.In the background of novel corona virus pneumonia,a large number of stock prices have fallen,while the pharmaceutical and biological industries is the industry with the largest market value of equity pledge,the equity pledge risk can not be underestimated.In order to solve the above problems,the state has put forward the concept of bail-out,taking local state-owned assets as the main body,providing listed companies with restructuring space and new financing ways to alleviate the short-term liquidity crisis.So can the equity pledge rescue play a positive role in stimulating the troubled enterprises? What is the and mechanism and motivations of the bail-out?This paper takes Jointown,a leading pharmaceutical and biological enterprise with high equity pledge ratio but great industry development potential,as an example to introduce the equity pledge of Jointown’s controlling shareholders and their concerted actors,and analyze the rescue process of Cinda Asset.First,understand the main strategic motivation and basic forms of the rescue,explore the adjustment of the "hybrid" rescue model to the company’s equity pledge structure,proportion and asset liability ratio,and think about its long-term performance mechanism.Secondly,it reviews and analyzes the overall risk of the rescue process,understands the causes of the company’s liquidity crisis,the motivation that Jointown seek rescue and Cinda Asset rescue,and discusses the possible risks.Finally,it analyzes the rescue effect,uses the event research method to analyze whether the rescue has an incentive effect on the stock price,uses the financial indicators to analyze whether the rescue improves the short-term liquidity risk of Jointown,uses the principal component analysis method to analyze the annual financial performance and industry ranking changes of Jointown before and after the rescue,and finally analyzes whether Cinda Asset achieve its rescue motivation.Based on the above research framework,the following research conclusions are obtained:(1)the liquidity crisis of Jointown came from the large amount of accounts receivable and foreign equity investment brought by the expansion strategy,and relying on short-term debt financing increases the burden of the capital chain.(2)Jointown mainly sought state-owned assets relief due to insufficient cash flow management capacity and the risk of equity pledge closing positions.Cinda Asset decided to adopt the mode of "re pledge + debt to equity swap" based on the development prospect of Jointown and the benefit goal of state-owned assets.(3)The rescue behavior has a positive stimulating effect on the short-term stock price.At the same time,after the rescue,the company’s short-term liquidity crisis has eased,the company steadily recovered cash flow and improved debt structure,the risk of the company’s capital chain breaking is reduced.The financial performance after the bail-out also shows that the bail-out behavior can have a significant positive impact on the company’s profitability,solvency and growth ability by improving the financing capacity of Jointown,improving corporate governance and expanding strategic cooperation,and the industry ranking continues to improve.Cinda Asset also achieved investment returns and social benefits in the process of equity pledge rescue,achieved the rescue motivation.According to the research conclusions,relevant suggestions are put forward for both sides of the rescue.Listed companies need to increase the disclosure of equity pledge information,give full play to their subjective initiative and make use of the rescue background to improve the company’s industry status;Rescue institutions should strengthen top-level design and establish a whole process risk prevention mechanism to improve the efficiency of rescue.