Research On The Impact Of BL Controlling Shareholder’s Equity Pledge On The Company’s Value

As a financing method,equity pledges have the advantages of low cost,few restrictions and simple operation,which are favored by some listed companies.Equity pledge itself has many advantages,but on the contrary,there are also certain risks.When a controlling shareholder makes a higher percentage of equity pledges,it increases the degree of separation of control and cash flow rights.An increased degree of separation of the two rights can lead to agency problems,resulting in damage to the interests of creditors and shareholders.At the same time,with a high equity pledge ratio,controlling shareholders may adversely affect the value of the company for their personal interests.Therefore,studying the path and extent of the impact of controlling shareholders’ equity pledges on firm value can strengthen the firm’s equity pledge decision-making ability.And it is important for enhancing the effectiveness of corporate governance and maintaining the stability of capital market.In this paper,we select BL Company as a case study and use a combination of theoretical analysis and case study,and qualitative analysis and quantitative analysis to study the impact of controlling shareholders’ equity pledges on firm value.First,we sort out the motives of controlling shareholders’ equity pledges,the reasons why equity pledges affect firm value,and the screening of firm value assessment methods through extensive literature research.Second,we analyze the current situation of BL’s equity pledges and focus on the paths through which controlling shareholders’ equity pledges affect the value of the company.This paper also provides an in-depth analysis of the impact on firm value of controlling shareholders’ actions such as implementing surplus management,conducting related-party trading activities unrelated to BL’s business,appropriating the firm’s capital,setting unreasonable dividend distribution policies,and inhibiting the firm’s research and development innovation.Finally,we examine the impact of equity pledges on BL’s stock price through market reaction,then use EVA and Tobin’s Q to quantitatively analyze the impact of equity pledges on BL’s stock price and analyze the change of company value.The results of the study found that: the controlling shareholders of BL Company engage in more frequent and high percentage of equity pledging activities,which prompts the controlling shareholders to act in ways that affect the company’s development.These actions can affect the company’s business situation and harm the overall value of BL Company.Meanwhile,due to the controlling shareholder’s equity pledge,the company’s share price fluctuated significantly and showed a downward trend,which adversely affected the market value of the company.On this basis,the article makes some recommendations in terms of both internal governance and external regulation to better strengthen the regulation of controlling shareholders’ equity pledging activities and prevent them from acting in a way that damages the value of the company.