A Case Study On The Value Effect Of Controlling Shareholder's Equity Pledge In G Company

In a rapidly developing economy and society,the financing method of equity pledge is favored for its unique advantages in terms of cost,efficiencyand control.According to Wind database statistics,as of August 30,2019,the number of pledged companies in the A-share market was 3,217,with a total market value of 4.54 trillion yuan,accounting for about 8% of the total market value.This article selects the case of the controlling shareholder's equity pledge in G Company,which is one of the listed companies with a high proportion of equity pledge in 2018.The controlling shareholder of G Company has started equity pledge since2014,and the total number of pledges reached 30 times in 2018.At the sam time,the pledge rate reached 99.02%.The company landed on the capital market in 2014.One year later,the market value reached its peak.Now it has only 2.7 billion yuan in market value,which has fallen by 37.3 billion in four years.Therefore,this article focuses on the value effect of the controlling shareholder's equity pledge behavior of Gcompany,and further explores its value impact mechanism and path.The study of this case has certain theoretical and practical significance for the study of the characteristics,motivations and value effects of equity pledge.This article starts with the development history of G Company,the shareholding structure and comprehensively describes the controlling shareholder's equity pledge behavior.Secondly,analyze the impact of controlling shareholder's equity pledge from the perspective of short-term market effects and long-term financial effects.Then,after analyzing the driving force of controlling shareholder's equity pledge,the author further analyzed the value influence mechanism from the two aspects of the separation of the two rights and the information asymmetry by combining the control of private interests and the information asymmetry theory.Then,explore the value impact from three aspects of investment behavior,management and interest appropriation path.Finally,through the analysis of this case,the enlightenment of the case is drawn from the aspects of the company's internal governance,pledgee,small and medium shareholders,and government legal supervision.It is hoped that it will serve as a reference for stakeholders.Based on the case study,this article draws the following conclusions:(1)The short-term market response of the company's controlling shareholder's equity pledge is negative.In the event window,the cumulative excess return after the event day is significantly smaller than before the event date,and the cumulative excess return within the event window isnegative;(2)during the period of controlling shareholder's equity pledge,the company's financialperformance is not good,profitability,debt repayment ability,and operating ability have shown a downward trend year by year;(3)the driving force of the controlling shareholder's equity pledge of G company includes the market value of the company overestimation,meeting own financing needs,get two-way option and transfer risks;(4)stock price fell after pledge under asymmetric information,and a high proportion of pledges increased the separation of the two rights of the controlling shareholder;(5)G company holding the pledge of shareholders' equity has caused the company to overinvest and plunged into a crisis of survival.At the same time,it deviated from its main business and exacerbated financial risks,led to the occurrence of interest appropriations such as connected transactions and related guarantees.(6)The case was provide reference for regulators,investors and other stakeholders.