Analysis Of The Motivation And Economic Consequences Of Equity Pledge Of Controlling Shareholders In The Real Estate Industry

As a basic industry of the national economy,the rise and fall of the real estate industry is related to the growth of the gross domestic product and the people’s home and business.For real estate companies,capital is the blood and lifeblood of their continuous operation,and financing through traditional channels alone is largely unable to meet the huge capital needs of enterprises.As one of the important financing channels for listed companies in recent years,equity pledge financing not only has the advantages of low threshold and fast circulation,but also allows controlling shareholders to obtain funds quickly without losing control.At the same time,a well-functioning capital market provides a stable basic environment for equity pledges,and therefore the number and proportion of equity pledges in the capital market have been rising year by year.Shareholders of listed companies can pledge their equity in the company as pledges and borrow money from banks and other financial institutions,and the funds obtained can be used for personal needs or,as controlling shareholders,may be invested in the daily operation of the company or in new projects.Due to the nature of the real estate industry,it has long been common for real estate companies to pledge their equity.This paper examines the pledging of equity from the perspective of controlling shareholders in the real estate industry.By reading and organizing relevant domestic and foreign literature,this paper briefly reviews the current domestic and foreign research related to equity pledging behavior and summarizes and elaborates on principal-agent theory and information asymmetry theory,which provide the theoretical basis for this paper’s research.Based on the structure of scale statistics on equity pledges of A-share listed companies and the real estate industry,and taking into account the characteristics of the real estate industry,the current situation of the industry is analyzed,which paves the way for the subsequent case study.The case study of ST Taihe found that: due to the special characteristics of the real estate industry,which is highly influenced by macroeconomics and policies,and the intense competition in the industry,ST Taihe’s controlling shareholders engage in frequent equity pledges for the three-fold purposes of satisfying the company’s investment needs,providing guarantees for subsidiaries and transferring their own operational risks.In the research part of the economic consequences,it is found that: ST Taihe’s controlling shareholders’ behavior of making multiple equity pledges over the years and maintaining a high pledge ratio for a long period of time has not really improved the company’s operation,and although the impact on the company’s share price aspect is not obvious,it has caused different degrees of negative impact on the company’s financial indicators and the company’s value,and has also harmed its own control and the interests of small and medium shareholders.Finally,based on the results of the case study,we propose initiatives to limit the high proportional equity pledging behavior,improve the information disclosure system and increase the supervision from the perspective of the regulatory level,and suggest strengthening the supervision of the controlling shareholders,avoiding the blind expansion of the company and paying timely attention to the controlling shareholders’ solvency from the perspective of the company level,so as to provide some references and practical implications for promoting the healthy development of listed equity pledging behavior.