Research On The Impact Of Equity Pledge Of Dongcheng Pharmaceutical On Enterprise Performance

At present,the scale of equity pledges in the A-share market is showing a spurt of growth.Against the backdrop of the 14 th Five-Year Plan,which proposes to build an effective financial system to support the high-quality development of the real economy,equity pledges are an effective financing tool to realize equity.However,as some enterprises in the expansion stage are in urgent need of funds,the use of equity pledges is an efficient and inexpensive way to raise funds,which on the one hand provides an effective channel for enterprises to obtain quick financing and makes equity pledges by enterprises high in frequency and large in amount.However,on the other hand,it can also lead to the risk of share price collapse and transfer of control after equity pledging,and at the same time cause the major shareholders to encroach on the interests of small and medium shareholders,which will bring negative impact to the listed company;however,obtaining financing by means of equity pledging will greatly alleviate the problem of capital constraint of the enterprise,and at the same time,the rise of share price after stable development will also bring positive benefits to the development of the enterprise.The positive or negative impact of equity pledging on enterprises is thus worth exploring in depth.It is important to promote the healthy development of equity pledging among listed enterprises in China and to provide reference for the implementation of equity pledging by enterprises.In this paper,Dongcheng Pharmaceutical,an emerging nuclear pharmaceutical company,is used as a case company.Firstly,the current situation and characteristics of equity pledges of Dongcheng Pharmaceutical are analyzed,and the impact of equity pledges on the business decision making behaviour of enterprises such as R&D investment is explored in the context of the motivation and impact paths of equity pledges of enterprises,and the impact of equity pledges on the corporate performance of Dongcheng Pharmaceutical is analyzed through three dimensions: short-term financial performance,long-term financial performance and non-financial performance.Then,the event study method was applied to analyse the share price volatility based on the change in the excess cumulative price-earnings ratio at important time points of the corporate equity pledge,and thus determine the short-term performance of the equity pledge affecting the corporate performance;the factor analysis method was applied to analyse the long-term performance of the corporate equity pledge,and by observing the correlation of the factors,and then conducting vertical and horizontal analysis of the financial indicators represented by each factor respectively,to comprehensively determine the impact on the long-term performance The impact of equity pledges on the long-term performance of enterprises was analyzed using factor analysis,and nonfinancial indicators such as product development,market share and employee structure were selected.The study concluded that the need for financing drove Dongcheng Pharmaceutical’s continued implementation of equity pledges;equity pledges had a negative impact on corporate performance;and the reduction of equity pledges improved corporate financial performance.Finally,recommendations are made from the perspectives of internal governance and external regulation: companies should improve information disclosure on equity pledges to avoid the risk of share price volatility caused by poor information transmission;companies’ internal control systems should be optimized to improve the equity structure;and regulatory units should strengthen control over equity pledges to reduce pledge risk.