A Study Of Controlling Shareholders’ Share Pledge Rate Decision Based On Cox Survival Analysis And Option Pricing

In recent years,share pledge financing has become an essential financing channel for shareholders of listed companies in China due to the convenience,low financing cost,and large financing amount.As of March 8,2021,the number of shares pledged by major shareholders in the A-share market was 552.369 billion,the number of share pledge by major shareholders accounted for 18.73%of the total share capital,and the total market value of outstanding positions of major shareholders was 300.6249 billion yuan.In share pledges,the solvency of the pledgee and the price volatility of the pledged stock are the main risks of equity pledges.In order to minimize the negative impact of the default of the pledgee or the fluctuation of the stock price,and to obtain a reasonable return,the pledgee needs to give a reasonable pledge rate.When the pledge ratio is too high,even if the price of the pledged stock fluctuates slightly,there will be a situation the pledgor requires the pledgee to cover the position in time.In this case,if the pledgee is unable to cover the position in time,the pledgor will have to bear the huge loss caused by the default of the pledgee.When the pledge rate is too low,the amount of funds that can be financed for the same number of shares is limited,which will make it somewhat more difficult for the pledgee to raise funds and reduce the willingness to raise funds,and the pledgor will not be able to earn higher interest income as a result.Based on the realistic background,exploring how to manage risks through share pledge rate decisions has gradually become a hot topic of concern in the field related to share pledges.In view of this,this paper first discusses the research background,significance,and methodology of the share pledge rate decision,sorts out the research line of this paper,and proposes the possible innovation points of this paper.Secondly,this paper compares and reviews relevant domestic and international literature from three aspects,including the formation of share pledge risk,the survival analysis of the pledgee’s solvency and share pledge rate,and the option nricing method of share pledge.Next.this paper constructs a survival analysis model to assess the solvency based on the financial status of the pledgee at the time of share pledge and then discusses the relationship between the pledgee’s solvency and the best quality pledge rate based on COX regression survival analysis of the relevant data in the A-share market.Subsequently,this paper constructs an option pricing model for share pledged loans based on stock price volatility and analyzes the relationship between stock price volatility and pledge rate.Further,a dual-objective decision model is constructed from the pledgee’s perspective by combining the default risk of the pledgee and the price risk of the pledged share,and a reasonable pledge rate is given by the quantitative analysis of the share pledge risk.Finally,the research results of this paper are summarized,and based on the conclusions,we propose targeted suggestions for pledgees,pledgors,and regulators respectively,and provide ideas for subsequent research based on the shortcomings and limitations of our own research.After studying the decision problem of controlling shareholders’ equity pledge ratio based on survival analysis and option pricing methods the following conclusions were finally obtained:(1)The expected return of the pledgor has an inverted U-shaped relationship with the share pledge rate,and the expected return of the pledgor tends to increase and then decrease as the share pledge rate increases.(2)In the pledge rate decision process considering the risk of a decline in the value of the pledged share,the pledge rate is practically independent of the size of the loan rate and the market risk-free rate,and the dependence of the pledge rate on the loan rate and the market risk-free rate is only reflected through the risk premium R-r.(3)If the value of the pledged share continues to fall during the life of the loan and the pledgee defaults,the pledgee will exercise the option,so the present value of the risk premium on the equity pledge should actually be equal to the value of the put option.(4)In the survival analysis of material listed companies’ ability to repay loans,gearing ratio,cash turnover ratio and total asset turnover ratio are more sensitive to their probability of default;the higher the degree of deviation from normal levels of these financial indicators,the higher the probability of default of such companies in share pledges.(5)Under the risk-free arbitrage principle,a pledged loan can be viewed as a portfolio with a risk-free loan and a put option.The present value of the share pledged loan value shows an inverted U-shaped relationship with the pledge rate,and as the pledge rate increases,the present value of the share pledged loan value shows a tendency to increase and then decrease.