Study On The Impact Of The Equity Pledge Of Geo-Jade Petroleum Corporation Controlling Shareholders On Its Company Value

Equity pledge has become a new financing method favored by shareholders under the background of difficult financing and guarantee for Chinese enterprises due to its characteristics of strong liquidity,easy realization and simple handling procedures.The equity pledge progressed smoothly when the stock market went up,but its risks gradually became apparent when the stock market went down.In recent years,controlling shareholders have frequently used equity pledges to carry out high-level investment or transfer the risk of stock price decline,and related incidents that encroach on company assets and the interests of small and medium shareholders have occurred frequently.Guotaian data shows that as of October 19,2018,the market value of stock pledges in the A-share market was as high as 4.4 trillion yuan,and the number of stocks involved in equity pledges in the Shanghai and Shenzhen markets accounted for 98.06% of the total number of stocks in the A-share market.It can be seen that the current equity pledge risk of A-share listed companies makes the financial supervision department quite anxious behind the reality of "no shares and no pledges".Obviously,managing the equity pledge is an indispensable step to stabilize the A-share market.This article takes the case of the first company in 2017 that was forced to close a position due to the pledge of the controlling shareholder's equity-Intercontinental Oil and Gas Co.,Ltd.as a case study.After introducing the relevant concepts and theoretical basis,the case company Intercontinental Oil and Gas was introduced.In the case analysis,the process and motives of the equity pledge of the Intercontinental Oil and Gas Controlling Shareholders were first introduced.The analysis of the intercontinental oil and gas equity pledge resulted in deeper separation of the two powers and caused serious agency problems.The equity pledge affected the company's risk decision-making and risk level.The equity pledge induced the controlling shareholders to conduct earnings management,which had an impact on the company's value.Conduct empirical analysis again,mainly using the event research method,financial indicator method,and Tobin Q value to measure the change in company value before and after pledge.By comparing the company's short-term market response,operating performance changes and company value changes before and after pledge,it reflects the Intercontinental.The impact of frequent equity pledges of oil and gas controlling shareholders on company value.Through analysis,this paper draws the following three conclusions: First,the equity pledge of the controlling shareholder will lead to the separation of the two powers,which in turn leads to the agency problem between the controlling shareholder and the small and medium shareholders,which will have a negative impact on the company's value.Second,the equity pledge of the controlling shareholder will change the risk appetite of the shareholders in corporate governance,leading to increased risks of the company's operating risks and loss of control of the shareholders,which will have a negative impact on the company's value.Third,the equity pledge of the controlling shareholder will prompt shareholders to carry out some earnings management actions in order to maintain the stock price,which will negatively affect the company's value through related transactions and management guarantees.Therefore,in order to avoid the negative impact of equity pledge on the company's value,this article puts forward three proposals to limit the proportion and frequency of equity pledge,enrich the content of information disclosure,and enhance the independence of the board of directors and the board of supervisors,so that the equity pledge can play a positive role in the company's value.