Equity Pledge By Big Shareholders?Earnings Management And Stock Price Returns

With the prosperity and development of China's capital market,the capital market provides a variety of financing methods.The equity pledge financing method is more and more favored by financial institutions and companies.According to Wind database statistics,there are 4274 cases of the equity pledge financing method,and the growth rate is 59.66% compared to 2014.Equity pledge financing method has shown an explosive growth,and now it has become a universal financing method because it has its own unique advantages over traditional real estate mortgage and chattel mortgage.The equity pledge financing method broadens the financing channels of the companies.However,while affirming the positive role of equity pledge,we must also realize that equity pledge may have negative impacts.For creditors,they may be confronted with risk if they can not choose the prospective equity.For debtors,the biggest risk may be that the stock price falls.For the major shareholders of listed companies,if the market has little confidence in the listed company,the stock prices may fall sharply.The major shareholders need to provide more guarantees.In order to avoid the risk of falling stock prices,major shareholders may execute earnings management or stock manipulation.As the cost of earnings management is relatively low,the major shareholders have the motivation and the ability to adjust the company's market information to avoid risks.On the other hand,if the major shareholders pledge equity when its market value is high,and give up equity when its market value is low,it will infringe on the interests of creditors and small shareholders.Since the emergence of equity pledge financing method,there have been many studies on equity pledge and earnings management.Based on the previous studies of equity pledge and earnings management,this paper makes a further study on the relationship between the two.First of all,this article studies the changes of the extent of earnings management of the same company.The research result provides a new empirical evidence about the relationship between equity pledge and earnings management;Second,one of the purpose of earnings management is market value management,and there is evidence that shareholders may manipulate the price of stock to avoid risks.At present,there is little paper studying the relationship between equity pledge and stock return rate.This paper studies the relationship between equity pledge and stock return rate,which can provide new empirical evidence.