The Analysis On The Controlling Shareholder's Equity Pledge And Its Impact-A Case Study Of Guirenniao Co.,Ltd.

Equity pledge refers to the pledge of a borrower to mortgage a certain equity held by the borrower to a financial institution in order to obtain a loan.With the rapid development of China's capital market and the rapid growth of listed companies,equity pledge has gradually become an important way of financing.In recent years,it has experienced explosive growth.Among them,the use of equity pledge by controlling shareholder to obtain funds is particularly frequent.In fact,equity pledge has many advantages.On the one hand,equity pledge can broaden the financing channels of listed companies.On the other hand,equity has the characteristics of strong and easy liquidity.Major shareholders of listed companies often use this method for financing,which can transform static book equity into current capital,complete the re-circulation of capital,and solve the problem of capital shortage faced by the company and controlling shareholder.At the same time,after the equity is pledged,the controlling shareholder not only obtained the funds,but also maintained the status of its controlling shareholder,which made the equity pledge get the attention of all parties.However,the pledge behavior of the controlling shareholder will also send some negative information to the market,such as the listed company's financial situation is worrying,and the controlling shareholder's fund is tight,etc.At the same time,the pledge of controlling shareholder's equity will increase the risk of the transfer of control rights and accelerate the separation of control rights and cash flow rights,which will lead to the agency problem of companies,and then have a negative impact on listed companies and stakeholders.In this case,the pledge behavior of the controlling shareholder has attracted extensive attention of scholars.This paper selects Jinjiang sports brand--Guirenniao co.,ltd.for case analysis.Guirenniao is a comprehensive enterprise,integrating the research,development,production and sales of sports shoes,clothing and auxiliary products.It was founded in1987 and listed on the Shanghai stock exchange at the beginning of 2014.Influenced by the macroeconomic situation,the overall business situation of the shoes and clothingindustry fluctuates greatly in recent years,and the industry performance fluctuates significantly.Since its listing in 2014,in order to realize the strategic goal of diversified transformation,Guirenniao has made a large number of mergers and acquisitions of various related enterprises.Since 2014,the controlling shareholder has started financing by means of equity pledge.In view of this,on the basis of reading and researching the literature about the pledge of controlling shareholder's equity in the past,this paper takes the pledge behavior of controlling shareholder with high proportion and multiple times as the research object.It mainly analyses the motivation of the pledge of controlling shareholder's equity and the impact of the pledge behavior,which has important academic value and practical significance for the standardized operation of the pledge of controlling shareholder's equity in the future capital market.Firstly,this paper introduces the research background and significance,reviews the relevant research on the motivation and influence of controlling shareholder's equity pledge by domestic and international scholars,and then introduces the theoretical overview of controlling shareholder's equity pledge.Secondly,this paper uses the methods of theoretical and case analysis.It applies information asymmetry theory,information transmission theory,control theory and principal-agent theory to specific cases to analyze the motivation of controlling shareholder's equity pledge and the present situation of equity pledge.Thirdly,the paper makes an in-depth analysis of the impacts of the shareholder's pledge from four aspects: market effect,corporate governance,financial analysis and stakeholders.Based on the actual case of the controlling shareholder's equity pledge of Guirenniao,the close relationship between the controlling shareholder's equity pledge of Guirenniao and a series of changes in the enterprise is analyzed.In terms of the analysis of the market reaction after the pledge of the controlling shareholder's equity,based on the event research method,the author finds that the stock price fluctuates abnormally and declines after the pledge.Through the trend of the stock value before and after the announcement,the cumulative excess yield curve of the stock price continues to decline and is negative.In the aspect of corporate governance,the separation of cash flow right and control right of Guirenniaois aggravated,and the agency problem of the company is also highlighted.At the same time,the company is facing the risk of transfer of control right.And then,through the analysis of financial statements and key financial indicators in the years before and after the pledge,I find that the overall operating performance of the Guirenniao is declining,and its debt paying ability,profitability,operation ability and growth ability are all affected to varying degrees after the pledge.In terms of stakeholders,the interests of minority shareholders have been damaged,and financial institutions bear the risk of depreciation of pledged equity.Finally,this paper summarizes the research conclusions of the pledge of the controlling shareholder's equity of Guirenniao and the experience enlightenment to the relevant listed companies.The cash flow problems prompted Guirenniao controlling shareholder to pledge shares.The lack of disclosure of the pledge information is an important factor that affects the decline of the company's stock price.The high proportion and frequent equity pledge of the controlling shareholder has a negative impact on the company's governance and has further deteriorated the company's financial position.The interests of minority shareholders have been damaged.For the main body of listed companies,combined with the actual situation of this paper,this paper puts forward some suggestions on the pledge behavior of controlling shareholder's equity,such as broadening financing channels,improving the transparency of the disclosure of the pledge information,limiting the proportion of the pledge,and improving the internal governance mechanism,so as to jointly reduce the risk of the pledge of controlling shareholder's equity in listed companies.