On Financing Motivation And Economic Consequences Of Equity Pledge Of Controlling Shareholder

2018 is an important year for China's economic development.China's economy has transformed from high-speed growth to high-quality development.With the booming capital market,the supervision of financial markets has become more and more strict.For many listed companies that lack liquidity,the traditional financing methods obviously can not meet the needs of the capital chain,and the equity pledge,has come into the public's attention.More and more controlling shareholders use the advantages of equity pledge to strengthen the development of listed companiesand stock quality.“No shares without pledge” is often used by the outside world to describe the popularity of equity pledge in the A-share market.For listed companies,the business development needs a lot of capital,equity pledge financing for those who expand the market and business development of listed companies,is equivalent to timely assistance.The capital of equity pledge financing makes the business of major shareholders develop smoothly and injects into listed companies,which is also conducive to the development of the company.However,while pledging shares to listed companies to activate stock assets,because the controlling shareholders of listed companies will use the pledge of shares to weaken the incentive mechanism,and many of the controlling shareholders of listed companies have a higher concentration of shares,which undoubtedly aggravates the principal-agent effect between the large shareholders and small and medium-sized shareholders.In particular,if the large shareholders are the operators of listed companies,it will happen when the large shareholders are the operators of listed companies.in the event of equity pledge,the major shareholders are likely to have moral hazard.The hidden risks of equity pledge financing are also gradually exposed,and has caused widespread concern in the market.Since 2014,stock pledge has entered an accelerated expansion period and become a common financing method for shareholders of listed companies.From the perspective of the new scale of pledge over the years,the new scale of stock pledge increased significantly in 2015,eached its peak in 2016,and declined in 2017.Especially in 2015,equity pledge in the capital market is faced with the risk of equity pledge liquidation of listed companies.At the 19 th CPC national congress,there was a general consensus that the risks in China will mainly come from finance in the future.Therefore,the 19 th CPC national congress proposed that capital markets should resolutely eliminate systemic financial risks.This paper takes the case analysis as the research method,chooses the listed company Guirenniao as the case study object,first explains the equity pledge from the theoretical part,then analyses the specific situation of Guirenniao Company's equity pledge,and then analysis of the specific conditions of the Guirenniao equity pledge,again from the equity pledge financing motivation as well as the direct and indirect impact on the value of the company,analyses the impact of Guirenniao company's equity pledge,and at the same time,analyses the impact of Guirenniao company's equity pledge.This paper investigates the operation situation of Guirenniao company before and after the equity pledge,deeply analyses the use of the funds obtained from the equity pledge financing,and makes a detailed study of the economic consequences caused by repeated equity pledge of Guirenniao.Finally,I also put forward some suggestions on how to prevent the risk of equity pledge in view of the economic risks caused by the pledge of Guirenniao's equity.There are three mainmotivations for the pledge of shareholder's rights.One is to supplement liquidity,the other is not to dilute the shareholder's rights,and the third is to safeguard the interests of the shareholder.Therefore,this paper introduces the case of Guirenniao company to analyze the motivation of controlling shareholders' equity pledge and its economic consequences such as how to encroach on the company's interests,affect the company's performance and value,so as to provide relevant suggestions for controlling shareholders' equity pledge risk prevention.There are also three innovations in this paper.Firstly,this paper takes companies in traditional textile industry of A-share listed companies as the research object,and studies the motivation of equity pledge and tunneling behavior of large shareholders,which is rare in previous literature.Secondly,this paper focuses on the analysis of the internal relationship between equity pledge and its economic consequences,as well as the actual use of funds,and the key points.This paper analyses the risk of equity pledge,which has a strong practical reference,further increases the research on the behavior of equity pledge of major shareholders,and provides certain value for future research.Thirdly,it puts forward its own suggestions and views on the loss of corporate value and minority shareholders' rights and interests caused by equity pledge.This paper has certain research significance on how to prevent the risk of equity pledge of listed companies for A-share market and even the whole financial market.