The Impact Of Equity Pledge Of Controlling Shareholders On Bond Credit Risk

At present,share pledge has become a common financing method in China.At the end of 2022,there are about 2500 listed companies in A-shares with share pledge.Although share pledge has the advantages of convenience and low cost,the risk of control transfer and the opportunistic behavior of controlling shareholders brought by it will not only affect the company’s operation,capital liquidity,but also infect stakeholders such as bond investors.By the end of 2021,about 170 bonds of about40 A-share listed companies had defaulted,of which about 80% had pledged the controlling shareholders’ equity before the first default.At the same time,the regulators also has included the share pledge of controlling shareholders in the scope of factors of bond risk.The relevant document issued by the People’s Bank of China and the National Development and Reform Commission in 2020 pointed out that the share pledge of controlling shareholders should be disclosed when preparing for the bond prospectus.Combined with the general tone of strengthening the prevention and control of financial risks in China,it is of practical significance and necessity to study the impact of equity pledge of controlling shareholders on bond credit risk,which will help effectively resolve the risk of share pledge and reduce bond credit risk.Based on the annual data of corporate bonds issued by A-share listed companies from 2011 to 2021,this paper studies the possible impact of share pledge of controlling shareholders on bond credit risk.On the basis of exploring the impact of the company’s internal control and the attention of external analysts on the relationship between the two,this paper also introduces monetary policy to explore whether monetary policy has played a regulatory role between the two.In addition,this paper also studies if "tunneling",risk taking and short-term debt long-term use are the mechanism of the impact of controlling shareholders’ equity pledge on bond credit risk.The research results of this paper are as follows:(1)The equity pledge of controlling shareholders increases the credit risk of bonds.(2)The higher the quality of internal control is,the more it can restrain the influence of controlling shareholders’ equity pledge on bond credit risk.(3)The higher the attention of external analysts is,the more it will restrain the impact of equity pledge of controlling shareholders on bond credit risk.(4)The tight monetary policy environment will,on the whole,restrain the impact of equity pledge of controlling shareholders on bond credit risk.Under the tight monetary policy,the positive supervision effect of the external creditors of the company is stronger than the negative impact of the increased risk of the transfer of control right.(5)In terms of channel mechanism,the share pledge of the controlling shareholder can strengthen the "tunneling" motivation of the controlling shareholder,thus improving the bond credit risk;the equity pledge of controlling shareholders will strengthen the company’s investment preference for risk projects,and then improve the bond credit risk;the equity pledge of controlling shareholders will increase the level of shortterm debt long-term use,thus increasing the credit risk of bonds.Finally,according to the empirical results of this paper,relevant suggestions are put forward from the perspective of regulators,listed companies and bond investors,which is of certain significance to guide the normal development of equity pledge,standardize enterprise business activities and protect the interests of external investors.