Analysis Of The Influence Of The Controlling Shareholders' Equity Pledge Default On The Enterprise

In recent years,the equity pledge method has become a financing channel favored by listed companies because of its strong liquidity and easy realization.The equity pledge has facilitated the financing of listed companies and broadened the financing channels,the difficulty of financing of the company has been improved,but this financing method also has certain risks for listed companies.In particular,in recent years,a large number of listed company controlling shareholders have a high proportion of equity pledge.When the stock price falls below the pledge warning line,and the controlling shareholder can't add pledge shares or redeem the pledge stock,the pledge shares will be judicial freezing,it will even be sold by the licensee,so the controlling shareholder will passively reduce the holding,which will eventually lead to the loss of control for the firm of the controlling shareholder.Therefore,an in-depth analysis of adverse effects of the controlling shareholder's equity pledge defaults not only has a theoretical significance for the supplementary of the study on equity pledge default,but also has practical implications on study how to solve these kinds of problem.This paper starts with the domestic and foreign studies on the economic consequences of equity pledge,sorts out and analyzes the basic theories of equity pledge default,and comprehensively uses the literature research method,event research method and case study method,so as to conclude the adverse effects of equity pledge default of controlling shareholders on listed companies.This paper selects the case of the pledge default of the controlling shareholder of Gloria Pharmaceutical Co.,Ltd.,the company's largest shareholder,Gloria Group's accumulated pledge of shares accounted for 99.98% of the shares held by it,and the controlling shareholder was unable to add pledge or early redemption due to the expiration of the pledge period.The pledge of the equity of Gloria Pharmaceutical was all frozen by the judiciary.Since June 2018,the controllingshareholder has 3% of the shares held by the shareholder due to the default of the equity pledge.Therefore,by studying the economic consequences for the company caused by the default of the equity pledge of the controlling shareholder of Gloria Pharmaceutical,I hope to propose effective countermeasures for the company.This paper finds that the default of the pledge of the controlling shareholders has adverse effects on the four aspects of listed companies.Firstly,the default of the pledge of the controlling shareholder's equity has a negative impact on the stock price of the listed company and will cause the stock price to fall.Moreover,this paper uses the event research method to find out that the default of the pledge of the controlling shareholder's equity will cause short-term market risk.Secondly,the company may sugarcoat its cash flow to reduce the market volatility caused by the default of equity pledge.Furthermore,through Tobin's Q enterprise valuation,this paper finds that the default of the pledge of the controlling shareholder's equity will greatly reduce the enterprise value and cause losses to investors.Finally,the deeper impact of the default of the pledge of the controlling shareholder's equity is that once the control right of the listed company is transferred,it will lead to the change of the company's internal executives and corporate culture,and then affect the consistency and continuity of the company's strategy.Through the study of the case,this paper puts forward the following suggestions on the adverse effects of the controlling shareholder's equity pledge default on the listed company:Firstly,the company can reduce the dividend payment,asset restructuring and strengthen the collection of receivables to improve the company's capital situation.Secondly,the company can use the suspension to improve the company's situation,but also strengthen the management of the company to enhance investor confidence.Thirdly,the company can increase its value by buying back stock and improving management.Fourthly,in response to the changes in corporate strategy,the company should focus on relocating the company's objectives and strategies,giving play to its core competitive advantages,giving play to the role of leaders and determining the priority of strategic transformation.