Research On The Motivation And Risk Of Equity Pledge Of Enterprises On The New Third Board

Financing difficulties have been hindering the development of small and medium-sized enterprises in China.However,with the expansion of the New OTC Market to the whole country at the end of 2013,SMEs expanded their financing channels.Equity pledge has become the first choice of New OTC Market enterprises because of its advantages of high efficiency,low cost and activating restricted shares.However,compared with the main board market,the New OTC Market equity pledge started late,the relevant system is not perfect,and the high proportion of stock pledge has caused a lot of price risk,but we should give attention to those companies that have not yet exposed the crisis.Therefore,the research on the causes of equity pledge and the risk problems caused by it is of great significance for enterprises to prevent risks and the market.Firstly,based on the relevant literature and theory,this paper analyzes the current situation,causes and risks of equity pledge business in the New OTC Market.Then select LX company of the New OTC Market as the research object.Firstly,the process of equity pledge,the investment direction of equity pledge funds and the motivation of pledge are studied.Then,the Z-score Model,financial indicators,EVA economic value-added and other methods are used to make an in-depth study of the risks caused by the high proportion of equity pledge of LX company from the perspective of the company,and the causes of the risks are summarized,based on which suggestions are put forward.The results show that the motivation of equity pledge of case company is for the purpose of limited other financing channels and operating capital demand,rather than the tunneling behavior of encroaching on the company's interests.However,the high proportion of stock pledge increases the company's financial risk,credit risk,risk of control right change and liquidity risk.These risks are caused by the company's lack of risk control awareness,imperfect internal governance,unreasonable debt scale,lack of equity pledge control mechanism and external supervision.Finally,from the perspective of the company,in view of the risks and causes,the following suggestions are put forward:(1)the company strives to improve the level of operation;(2)improve the internal governance and internal control system of the company,and establish independent directors;(3)reasonably plan the debt scale;(4)the company establishes the equity pledge control mechanism to limit the proportion,time and fund transparency.It is hoped that it can provide some enlightenment to the case company and the equity pledge enterprises of the OTC Market.