Pledge Of Stock Rights,Financial Deepening And Market Value Management

Pledge of stock rights is a kind of secured loan that uses the share of the listed company as a pledge.After the non-tradable shares reform,equity pledge has become an important way for shareholders to refinancing.Equity pledge financing is more convenient than commercial loans.And it also can revitalize the stock market value of listed companies.Therefore,it is favored by shareholders.The collateral of equity pledge is the share of stock which value is in volatility.So in order to control the risk,pledgee banks,brokerage firms,trusts,etc.would set an acceptable range for the value of the pledge--the stock price.When the stock price falls below the warning line or reaches the liquidation line,the pledgee will require the pledger to call margin or repay the loan in advance.If the pledger is unable to repay,the pledged equity will be transferred and the pledgee will lose the ownership of the shares and may even lose the control of the company.This is the inherent risk of equity pledge.So pledgers would have the motivation to manage the stock market value to reduce the risk.In the meantime,under the moderate financial deepening environment,the quality of accounting information in the market will be improved,external supervision will be enhanced,and the level of information asymmetry in the stock market will be reduced.At this point,the market itself will tend to be efficient,thus reduce the need for companies to conduct market value management.At the same time,the external financing constraints of companies are reduced,which will expand the channels of equity pledged companies to refinance.Therefore,a moderate financial deepening environment can inhibit the motivation of market value management.Based on the data of the controlling shareholder's equity pledges of A-share market and non-financial listed companies in China from 2005 to 2015,this paper studies the effect of stock pledge on the market value management,and takes different levels of financial deepening environment into consideration.The result of the research shows that after equity pledge,shareholders will face the risk of losing the control right,which will increase the motivation for them to conduct market value management in order to stabilize the stock price.The financial deepening will enhance the effectiveness of the market and thus reduce the information asymmetry and financing constraints faced by enterprises,so it would curb the motivation of the enterprise to conduct market value management.However,if the degree of financial deepening is too high,financial deepening will conversely increase the disorder of the market,thus increasing the risk of asset price collapse and further motivating enterprises to conduct market value management in order to stabilize the stock price.In addition,the paper divides the enterprises into the non-state-owned enterprises and the state-owned enterprises and finds that the relationship between the equity pledge and the market value management is more significant than the state-owned enterprises,because the state-owned enterprises have the natural "soft budget constraint".In further study,this paper replaces the dependent variable to analyze the effect of market value management,and the result still supports the main assumption.At the same time,in the aspect of equity pledge risk,we further screen out the samples of the losing control rights from the total sample,divide the sample of pledge count and then carry on the regression analysis.The result is more significant when the pledgee faces the transfer of control right,and the number of pledges is also positively related to the market value management.The more pledges,the stronger the motivation of enterprise to conduct market value management.This article is divided into six parts.The first part is introduction.Mainly elaborated the background of this topic and the significance of research,general introduction of the article research ideas and research methods,and summarizes the main contents of the article and the construction of the framework.The second part is literature review.First of all,this paper arranges and analyzes the related documents of equity pledge,market value management and financial deepening.This paper further summarizes the inherent relationship between equity pledge and market value management and the impact of financial deepening on the motivation of market value management.And summarize the previous research experience.The third part is the theoretical basis of equity pledge,financial deepening and market value management.Including explanation on the three concepts,the analysis of the relationship among the three concepts and description of the relevant theoretical basis,including information asymmetry theory,financial deepening theory,and value management theory.The fourth part is theoretical analysis and research design.We establish the relationship between the inherent risk of equity pledge and the motivation of market value management based on the previous scholars' research.The fifth part is the empirical test of the correlation between equity pledge,financial deepening and market value management.First,we conduct the descriptive statistics,the mean test and the correlation analysis to make preliminary judgments.Then we use multivariate regression to verify the hypotheses in this article.Finally,we conduct further test and robustness test.The sixth part is conclusion and outlook.Based on the empirical analysis,we summarize the conclusions of the empirical analysis.Further,this paper presents the the future research prospects.