| In recent years,the new financing method of equity pledge has become more and more popular among listed companies.However,due to the continuous changes of China’s stock market,equity pledge has caused widespread social concern.When the price of the pledged stock falls,the pledgee has the right to ask the shareholders to repay the loan in advance or sell the stock which is pledged.Therefore,shareholders conducting equity pledge tend to deal with the risk of stock price decline by affecting the behaviour of the companies,which leads to strong incentives of companies’ market value management(Guojian Zheng et al.,2014)[1].Affected by the controlling shareholders,the companies will conduct positive earnings management through choosing different accounting policies after equity pledge,which damages the quality of companies’ accounting information,thus increasing the risks faced by creditors of companies.However,in order to guarantee the realization of equity pledge business,the pledgee will exert its "supervision effect" on the stocks that the companies pledged,which will help improve the governance level of companies(Yan Tan and Jing Wu,2013)[2],and thus has a positive effect on reducing the debt cost of companies.The study found that:(1)listed companies with higher proportion of equity pledge will also have higher debt costs accordingly,and the relationship between the proportion of equity pledge and debt costs is positively correlated;(2)the positive correlation between equity pledge and debt costs is significant in financing constrained companies;(3)compared with companies which have poor performance,the positive correlation of well-performed companies’ equity pledge and their debt cost is weak.The innovation that may be found in this paper is that the previous research on equity pledge focused on its multi-level agency problem.However,this paper studies the impact of shareholder equity pledge of listed companies on the company’s debt costs from the perspective of the risks faced by creditors. |
