Research On The Causes And Economic Consequences Of Pledge Of Controlling Shareholder’s Equity In Listed Companies

With the development of Chinese capital market,the demand for funds of listed companies is more and more intense,large shareholders are increasingly using equity pledge for financing,because of the characteristics of equity pledge is different from other financing way is its borrowing costs low,high speed,at the same time during the period of equity pledge,don’t need to transfer the actual control of the controlling shareholder,can alleviate the pressure of the holding shareholders’ funds in a short time.At the same time,equity pledge is also a double-edged sword in the capital market.It can be seen from more and more companies that the controlling shareholders use equity pledge to "empty" the event,that the controlling shareholders too frequently carry out equity financing,will produce great risks to the company.After controlling shareholders equity pledge,especially after frequent,high proportion to pledge,usually cause of corporate control and cash flow rights from each other,the problem of agency for large shareholders and minority shareholders will be more obvious,exacerbating implement a big shareholders occupy motives,due to the equity of listed private enterprises in China are relatively concentrated,external supervision is weak,can make the controlling shareholders through related party transactions and other means to transfer property,the indemnification,so as to achieve emptied of listed companies,the behavior of listed companies have a negative economic consequences.Stock equity pledge as the research object,this article selects south wind Yang Zishan because the company’s actual controller and concerted action person frequently during 2012-2018 will be the hands of equity pledge in exchange for money,Yang Zishan is at hand almost all of its equity pledge is $360 million,in May 2018 lost,can say this is typical of controlling shareholders use equity pledge to empty of listed companies,to encroach on minority shareholders interests.Through the analysis of this case,this paper explores the motivation behind the pledge of its controlling shareholder’s high proportion of equity,and analyzes the economic consequences of its behavior through LaPorta method,event study method,tobin’s Q value method and financial index analysis method.Based on the case analysis,it is believed that the long-term and frequent high proportion of pledge by the controlling shareholder of nanfeng shares to the listed company’s equity leads to the separation of the two rights of nanfeng shares,which reduces the cost of embezzlement and makes it easier for the controlling shareholder to encroach on the interests of the listed company.From the perspective of market reaction,this behavior has a negative impact on the stock price,company value and financial performance of south wind shares.Finally,Suggestions are put forward from three aspects: the internal governance system of the company,the review and evaluation of the pledged company,and the improvement of relevant laws and regulations,hoping to provide a useful supplement to the research on the pledge of stock rights and corporate governance of China’s listed companies.