Research On The Motivation And Economic Consequences Of Controlling Shareholders’ Equity Pledge

Working capital is an indispensable key element in the operation of a company.When a company has a capital demand,the first problem it faces is financing.However,banks and other financial institutions,which are the main sources of financing for enterprises,not only have many restrictions when providing financing for enterprises,but also have a long process and limited financing amount.At the same time,equity pledge financing has many advantages such as fast speed and does not affect control rights.Therefore,stock pledge equity pledge financing is favored by more and more enterprises.Since 2013,the number of equity pledge companies in the A-share market has risen rapidly.In 2017,the ratio of the number of pledge companies to the number of listed companies was even as high as 98.17%.Among them,the proportion of controlling shareholders’ equity pledges for equity pledges has reached 41.4%.When the equity pledge financing method is becoming more and more popular,the risks that come with it have gradually increased.Among them,there are countless listed companies in the quagmire of equity pledges.Although my country introduced the new policy of "deleveraging" in 2018,the overall pledge scale in the market has decreased,but the ratio of the number of companies pledged by controlling shareholders’ equity to the number of pledged companies is still increasing.It has reached 47.4% in 2019,and among them There are situations in which a large number of controlling shareholders pledge all the shares they hold.Because the number of companies that have caused or will cause serious consequences from the pledge of controlling shareholders’ equity is still abound,the situation is not optimistic,so this article uses the leading enterprise in the landscape industry,Oriental Gardens,as a case to explore the motives of its controlling shareholder’s equity pledge and study its economic impact The consequences are hoped to arouse all parties’ vigilance.In order to be able to explain the issue of controlling shareholder equity pledge more clearly,this article first sorts out domestic and foreign literature and related theories,and uses the motivation and economic consequences of controlling shareholder’s equity pledge as a starting point to pledge the equity of Oriental Garden’s controlling shareholder He Qiaonu.Issue case study.First introduce the basic situation of Oriental Garden and the process of pledge of controlling shareholders’ equity.Secondly,by analyzing Oriental Garden’s PPP and M&A project capital requirements during the equity pledge period,as well as the capital occupation of the controlling shareholder,large guarantees,supplementary pledges when the stock price goes down,and pledge of restricted shares,it is reasonable to speculate that Oriental Garden Holdings The four major motivations for shareholder equity pledge are: company financing needs,controlling shareholders’ interest encroachment,controlling shareholders to maintain control,and controlling shareholders to evade restrictions on restricted shares.Finally,this article studies the economic consequences of the equity pledge of Oriental Garden’s controlling shareholders from three different perspectives: controlling shareholders,small and medium shareholders,and companies,and draws three conclusions: First,the controlling shareholder’s equity pledge will bring itself the risk of losing control;Second,when the pledge ratio continues to rise,the company’s performance and value show a downward trend.Third,the controlling shareholder’s equity pledge will cause abnormal fluctuations in the company’s stock price,and the performance of the excess return and the accumulated excess return will be poor,and the interests of small and medium shareholders will be damaged.Based on the above research,this article sorts out Oriental Garden’s current countermeasures to the adverse economic consequences of equity pledges,and on this basis,puts forward some suggestions for the purpose of helping market supervision and protecting the interests of small and medium shareholders,hoping to benefit controlling shareholders’ equity Norms of pledge behavior.