Research On The Impact Of Controlling Shareholders’ Equity Pledges On Corporate Financial Risk

Since China’s "Guarantee Law" redefined the type of pledge in 1995,equity pledge as a new financing method came into being,which greatly solved the problems of difficult and expensive financing for enterprises and shareholders by virtue of its advantages of fast financing,low cost and easy realization,and was widely sought after and loved by shareholders.Theoretically,equity pledge belongs to the financial decision-making behavior of the controlling shareholder and has nothing to do with the enterprise,but due to the uncertainty and information asymmetry in the capital market,the equity pledge behavior of the controlling shareholder may send a signal to the outside world that it is facing serious financing constraints or financial difficulties,which in turn leads to fluctuations in the value of the pledged subject.In order to stabilize the stock price,the controlling shareholder may use its own voice to intervene in corporate decision-making after the equity pledge,reduce the relevant risks arising from stock price fluctuations through earnings management and information disclosure,and may also improve its ability to repay interest and protect its own interests by seeking the interests of the enterprise or small and medium-sized shareholders after the equity pledge.Then,what impact will the equity pledge of the controlling shareholder have on the financial risk of the enterprise? Therefore,based on the phenomenon of "one share dominant" in China’s capital market,it is of great significance to explore the impact of the equity pledge behavior of the controlling shareholder on the financial risk of the enterprise,and to explore the relationship between equity pledge and financial risk from the perspective of internal and external governance of the enterprise.Based on this,this thesis summarizes the relevant research of domestic and foreign scholars on equity pledge and financial risk,and on the basis of the existing research results,adopts theoretical analysis methods to further explore the internal logic of equity pledge and financial risk,puts forward research hypotheses,selects the relevant financial data such as equity pledge and corporate financial risk of controlling shareholders of A-share listed companies in China from 2013 to 2021 as research samples,and uses empirical research methods to explore the relationship between equity pledge of controlling shareholders and financial risk of enterprises.This thesis analyzes the mediating roles of executive shareholding,equity concentration and high-quality audit between the equity pledge of controlling shareholders and the financial risk of enterprises,and further explores the impact of continuous equity pledge and the flow of pledged funds on corporate financial risks.The main conclusions of this thesis are as follows:(1)the pledge of equity of controlling shareholders will increase the financial risk of enterprises;(2)Senior executives’ shareholding will aggravate the financial risks caused by the equity pledge of controlling shareholders;(3)equity concentration will inhibit the financial risks caused by the pledge of equity of controlling shareholders;(4)Compared with the absence of high-quality audit,high-quality audit can suppress the financial risks caused by the pledge of equity of controlling shareholders;(5)Continuous pledge by controlling shareholders will increase the financial risk of the enterprise;(6)When the equity pledge funds flow to the shareholders themselves or a third party,the equity pledge of the controlling shareholders will increase the financial risk of the enterprise.Based on the empirical research results,this thesis puts forward suggestions from the perspective of controlling shareholders,enterprises and market supervision,hoping to help enterprises correctly use equity pledge as a financing method,effectively prevent financial risks caused by equity pledge behavior of controlling shareholders,and promote the benign development of the capital market.