Study On The Controlling Shareholder’s Pledge Of Stock Rights,Stock Liquidity And The Risk Of Stock Price Collapse

Controlling shareholders,the important subject of a listed company,have an absolute control over the company by playing a decisive role in the process and results of decisionmaking and affecting the company’s stock price.The development of a company is naturally inseparable from the demand and support of funds.Compared with other financing tools,the pledge of stock rights has a feature of loose financial terms,small cost,convenience and efficiency.For example,a financing can be obtained by the pledge of gaining right if an agreement with financial institutions like the bank of the pledgee is reached.It is precisely because of these features that stock pledge financing is becoming more and more common in the securities market as well as the preference of the controlling shareholder as the pledgor who still retains the control over the company while obtaining the funds of financing.There seems to be no risk.However,according to the current pledge system of stock rights,the pledgee will require the pledgor to increase the pledge or cash equivalent for additional guarantee based on the demand of protecting its own interests when the pledged shares fall close to the early warning line.A close position will be enforced if the requirement is not met in time,which will expose shareholders to the risks like control transfer,a selloff or the collapse of stock price,having a negative impact on the company’s stock price.As one of the investment indicators concerned by investors,stock liquidity will not only reduce transaction costs,but also improve stock price information and affect stock price.Based on the above,this paper takes China’s A-share listed companies from 2012 to2020 as the data sample to study the controlling shareholder’s pledge of stock rights,stock liquidity and the risk of stock price collapse.First,qualitative analysis was used to sort out the previous relevant researches.And a theoretical support for the relationship between various elements was obtained based on the relevant theories,and an assumption was put forward.Then,an empirical test was carried out by using the measurement software to find experience from previous researches,select the appropriate method of element measurement,build a reasonable test model to test and verify the assumption and summarize the conclusion.Finally,corresponding specific suggestions for the involved subjects as well as prospects for the research were put forward.The final conclusions of this paper are as follows: first,the pledge of stock rights of controlling shareholders will aggravate the risk of stock price collapse.Second,the higher the liquidity of the stock,the more likely it is to collapse.Third,the improvement of stock liquidity can alleviate the aggravating effect of controlling shareholders’ pledge of stock rights on the risk of stock price collapse.Based on the above conclusions,this paper put forward some suggestions for the controlling shareholders,minority shareholders,market regulators and pledgors from their perspectives,and points out prospects for the research.These researches not only expand the research perspective of the risk of stock price collapse and enrich the research on its influencing factors,but also enrich the research on the pledge of stock rights and stock liquidity.The specific suggestions put forward from the perspective of each subject will also help to standardize and improve the pledge of stock rights system,prevent the risk of stock price collapse and promote the sound development of the stock market.