Research On The Influence Of Equity Pledge Of A Company’s Controlling Shareholder On Company Value

At present,there are various financing methods in the capital market,including equity financing and debt financing.However,as a derivative of the above-mentioned financing methods,equity pledges,with their many advantages such as simple procedures and low costs,have successfully stood out and are highly sought after by many fundraisers.However,in recent years,there have been numerous negative news stories about equity pledges,and there have been a few cases of pledged shares of listed companies falling below the closing line,resulting in a serious erosion of the interests of small and medium shareholders of listed companies as well as external stakeholders,causing listed companies and third party financial regulators to be increasingly concerned about the problems behind high equity pledge rates.Based on the above analysis,this thesis will take the controlling shareholder’s equity pledging behaviour as the starting point of the case study and explore in depth the impact of the controlling shareholder’s equity pledging behaviour of listed public companies on the value of the company,as well as the specific mechanism of the impact,so as to provide case studies for the capital market and external stakeholders to better regulate the equity pledging behaviour.This thesis firstly introduces the basic situation of equity pledges in the capital market in recent years;in this context,based on the research results of previous scholars and the actual situation of this case company,the research ideas of this paper are sorted out and the research content and methodology are refined;secondly,the concepts of equity pledges and control used in this thesis,as well as theories such as agency theory and information asymmetry theory are explained and briefly explained;and finally,the impact of equity pledges on the value of the company is briefly analysed through the case study method.The thesis also briefly analyses the impact of equity pledges on the value of companies in the context of the literature review.In the study of the case company,we firstly analyse the basic situation of the case company;secondly,we review the relevant information and interpret the motivation of the equity pledge of the case company;finally,we use the event study method and the value analysis indexes related to economic value added(EVA)and Tobin’s Q to study the short-term market effect and long-term market effect of the equity pledge of the case company.After analysing the case company,this thesis analyses the impact of the pledge on the value of the case company in terms of separation of powers and connected transactions,based on the relevant theoretical foundations.Based on the analysis of the case,the following conclusions were obtained:(1)the controlling shareholder’s equity pledge of the case company had a negative feedback effect on both the short-term and long-term share prices of the company,and market investors were generally not optimistic about the case company’s equity pledge;after the announcement date,the return of the case company’s shares was less than that before the announcement date;(2)the high frequency and high rate of equity pledge of the controlling shareholder of the case company made the company operating performance was poor;the economic value added and Tobin’s Q of the case company gradually decreased due to the long-term high pledge rate.Combining the problems identified in the case study and the relevant conclusions drawn,this thesis puts forward different recommendations for listed companies,pledgees and external regulators to prevent equity pledge crisis.