Research On The Influence Of Group Control On Excessive Debt Of Listed Companies

In recent years,Chinese non-financial enterprises are generally faced with the problem of high debt ratio.The CPC Central Committee and The State Council have also realized a series of problems caused by high debt,and innovated to take "deleveraging" as one of the key tasks of "three removal,one reduction and one supplement".The essence of "deleveraging" is to reduce excessive liabilities to a range that can be effectively prevented and controlled,which can prevent financial risks caused by excessive liabilities for the entity enterprises.Therefore,deleveraging is to control the liabilities of enterprises within a reasonable range,rather than the absence of any liabilities.It is of great practical significance to explore the causes of excessive debt and how to solve it.Under the long-term operation of high debt,high investment and high cost,Chinese enterprise groups are faced with a series of risks.In particular,some large enterprise groups continue to expand their own industries with mergers and acquisitions as well as the high asset-liability ratio and the high degree of separation of two rights have attracted much attention.Compared with independent enterprises,excessive debt risk of enterprise groups is more infectious and harmful,so it is important and necessary to study it.And compared with independent listed companies,group controlled listed companies seem to be more prone to excessive debt.In this paper,the existing literature on group control and excessive indebtedness of enterprises is reviewed and found that although the latest research literature confirms the view that group control enterprises are more prone to excessive indebtedness,the specific influence path is not clear.After sorting out the data of different industries,it is found that the debt ratio of listed companies controlled by the group is higher.Therefore,the path of excessive debt caused by the group control is worth further investigation.First of all,based on the existing theoretical support of the priority-based financing theory,tradeoff theory,internal capital market theory and principal-agent theory,this paper sorts out the path that group control may lead to excessive debt of listed companies and summarizes it into two dimensions of capital supply and capital demand.Then,the method of case study is used to select Dakang Agriculture,which was an independent listed company but had excessive debt after being controlled by the group,as an example.This paper analyzes the motivation of group control from the two dimensions of financing needs and benefit encroachment,analyzes the specific influence of Pengxin group control on the excessive debt of Dakang Agriculture from the theoretical path,and analyzes the resulting consequences.Finally,it is concluded that:(1)The influence of Pengxin System control on the excessive debt of Dakang Agriculture is reflected in the following ways: First,Pengxin System improves the debt financing ability and willingness of Dakang Agriculture by reducing the financial distress cost of Dakang Agriculture and its guarantee effect on Dakang Agriculture,thus affecting the excessive debt level of Dakang Agriculture.Secondly,in order to meet the capital demand,Pengxin holloped Dakang Agriculture through capital occupation,associated mergers and acquisitions,and leading Dakang Agriculture’s high-premium overseas mergers and acquisitions,which forced Dakang Agriculture to generate additional capital demand,resulting in excessive debt.(2)The reason why Pengxin System controls Dakang Agriculture is to meet its financing needs and encroachment needs.(3)The concentrated ownership structure,lack of internal governance mechanism and imperfect external supervision mechanism of Dakang Agriculture provided conditions for Pengxin Group to carry out capital embezzlement,which led to excessive debt of Dakang Agriculture.(4)The excessive debt of Dakang Agriculture resulted from the control of Pengxin Group is accompanied by some negative effects,which are manifested in the limitation of monetary funds of Dakang Agriculture,the decline of profitability,the rise of debt repayment pressure and the damage to the interests of minority shareholders.Based on the above conclusions,this paper puts forward the following suggestions:(1)To guarantee the participation of minority shareholders in governance by enriching investment subjects,differentiating shareholding structure and improving voting system.(2)Improve the internal governance mechanism of listed companies.To increase the size of the board of directors and the proportion of independent directors,to form supervision and restriction on senior executives and controlling shareholders,and to establish a complete and effective governance structure.(3)Establish a more targeted comprehensive supervision system,design regulatory indicators,monitor the risks of listed companies of enterprise groups,strengthen the supervision of information disclosure of listed companies of enterprise groups,establish a cooperative supervision mechanism with other regulatory agencies,and improve the audit quality.(4)Promote the whole group to go public.After the whole group goes public,the operation efficiency of the internal capital market will be further improved,so as to maximize the interests of the group.