Research On The Impact Of China's Controlling Shareholders' Equity Pledge On Corporate Performance

The government has successively introduced policies and measures such as simplifying government,decentralization,fee reduction and tax reduction,all aiming to increase their enthusiasm for innovation and development.In this environment,the company's financing needs will increase accordingly.However,in recent years,the problems of difficult financing and expensive financing are frequent.The company has become more and more restricted in financing.The equity pledge seems to be more and more popular with listed companies because of its simple procedures,efficient financing and the ability to retain control of the company after the equity pledge.Currently,China's A-share market is almost full-share pledge,and there are more and more companies that choose a high pledge ratio,and many of them are equity pledges with the participation of controlling shareholders.At the same time,as the absolute majority shareholder,the controlling shareholder's behavior has a significant impact on the company.On the one hand,the controlling shareholder's participation in the equity pledge can indeed be integrated into the funds,but at the same time of pledge,companies may face the risk of control transfer.On the other hand,even if the controlling shareholder 's initial intention to participate in the equity pledge is good,after the equity pledge,the controlling shareholder 's control and cash flow rights are separated,and the agency problem will be highlighted,so there may be behaviors that damage the company,such as infringing the interests of small and medium shareholders,hollowing out the company,and so on.Therefore,the equity pledge by the controlling shareholder is likely to be detrimental to the company.So this article studies the impact of equity pledge on company performance from the perspective of the controlling shareholder.Previous studies generally sorted out the literature on equity pledge and company performance separately or just sorted out the literature on equity pledge.This article combines the literature of equity pledge with the literature of company performance,and then sorts out,so that we deepen the understanding of their relationship and clarify the ideas.Considering that in recent years,the concentration of equity has become more and more high,and the second type of agency problem has also occurred,which also has a certain impact on corporate governance.Therefore,this paper selects the equity concentration as the regulatory variable to study whether it has some regulatory effect on the relationship between the controlling shareholder's equity pledge and the company's performance,so as to provide reference for corporate governance and the regulatory department that maintains market stability.In addition,compared with the financing problems of non-state-owned enterprises,state-owned enterprises have a wide range of financing channels due to their political background.When facing some financial difficulties,the government will provide support.Therefore,this article believes that the impact of the controlling shareholder's equity pledge on company performance may vary depending on the nature of the company.Through the theoretical analysis of the controlling shareholder's motivation to participate in the equity pledge,the agency problems and the adjustment effect,the four basic hypotheses are proposed.Next,this paper analyzes the current status of controlling shareholder's equity pledge and its company performance,observes the distribution of controlling shareholder's equity pledge ratio,and divides it into pledged group and unpledged group to compare company performance.These objective figures confirm the view of this article that the pledge of the controlling shareholder is large and has a negative impact on company performance.For further verification,this paper selects all relevant data of the controlling shareholder's equity pledge from 2010 to 2018 for empirical analysis.Unlike most of the previous literature,which only selected the data after the rise of equity pledges in 2013,the conclusions reached are biased.This article takes into account the data before the prosperity of equity pledge business,making the conclusions more objective and scientific than before.The specific conclusions are as follows: First,the equity pledge of the controlling shareholder will have a negative impact on the company's performance;Second,the concentration of equity can improve the performance of the company to a certain extent,because the higher the concentration of equity,the interests of shareholders and the company will converge,which will help improve the company's decision-making efficiency and have a positive impact on company performance;Third,when the controlling shareholder pledges the equity,the concentration of equity will strengthen the negative relationship between the controlling shareholder's equity pledge and the company's performance.Because the higher the concentration of equity at this time,the less likely the controlling shareholder's actions will be monitored;Fourth,in this paper,the sample data is grouped and regressed according to the property right.This article found that the negative impact of the shareholder's equity pledge on the company's performance is indeed more significant in non-state-owned enterprises than in state-owned enterprises.Finally,this article makes an in-depth analysis of the problems found in the research process and the causes of these problems.In addition,for these issues,several suggestions were made from the aspects of perfection and supervision of information disclosure and corporate governance,hoping to help the future development of equity pledge and alleviate the negative impact of the controlling shareholder's equity pledge on the company's performance.