Research On The Influence Of Stock Pledge Of Controlling Shareholder On Stock Price

With the continuous development of equity pledge business,the scale of pledge has expanded.Equity pledge financing has become an important financing channel for listed companies.On the face of it,there is no inevitable relationship between the stock pledge and the movements of the company's stock price.However,as the main body of the stock pledge is the controlling shareholders and major shareholders of the listed company.When the market fluctuation happens,the control right of the company may be transferred.For example,if the stock price falls to the “mandatory unwind level”,the pledged stock will be forced to liquidation by the investor according to the pledge contract.This situation will seriously affect the stability of the stock price and the operation of the company.From the perspective of current global economy,the world is in a state of declining economic growth,and the new economic growth force is insufficient,Owing to this,the financing environment abroad is getting worse.From a macro perspective,China's GDP growth is gradually declining,and new economic growth points have not appeared,resulting in the overall economic environment worse than before.And when the country was in the financial crisis in 2008,small and medium-sized enterprises had problems such as difficult financing and untimely repayment,which it was difficult for traditional financing channels to exert their functions.Under the influence of internal and external financing environment,the problems of financing difficulty and high financing cost perplex the development of enterprises.Therefore,equity pledge is the most new way of financing,which is favored by listed companies,especially for small and medium-sized enterprises,because of its advantages of simple operation,convenient time and low financing cost.However,with the continuous expansion of the equity scale,the risk is also gradually increased.Based on the research background of equity pledge,this paper analyzes the influence of controlling shareholder's equity pledge on stock price.Based on the theory,this article is based on information asymmetry,the principal-agent control privatization and signal transmission theory,and the controlling shareholder equity pledge has two main problems such as principal-agent and control transfer on principal-agent problems.According to these problems,the benefits of the company will be encroached by the controlling shareholders,and what has followed is that the interests of minority shareholders will be damaged.When this situation become more extreme,it will result in a chaotic corporate governance and reduce a company's value.With the proportion of equity pledge to be increased,the risk of control transfer will be expanded.Due to this,the controlling rights of a company will be loss,and the benefits of the company will be damaged as well.This problem is transmitted to investors through signal transmission and information asymmetry,thus causing stock price fluctuations.It also have some similar theories can be illustrated.For instance,the risks from the equity pledge have different impacts on stock price.In the empirical research,this paper takes the listed companies in Shanghai and Shenzhen A-share markets as the research object,and takes 2007-2018 as the research interval,Moreover,the research method of combines with of empirical research to theoretical research,in order to make an empirical analysis on the relationship between the cumulative pledge rate of controlling shareholders' equity and the stock price.Under this research background,according to the market participation,enterprise nature and In different circumstances,the cumulative pledge rate of the controlling shareholders has an impact on the stock price.The empirical results show that:(1)from the overall sample,the impact of controlling shareholders' equity pledge on stock price volatility is negative,that is to say,equity pledge can reduce stock price volatility and make stock price more stable.(2)With the increase of the cumulative pledge rate,the impact of the controlling shareholder's equity pledge on the stock price changes from negative to positive,which shows that with the increase of the cumulative pledge rate,the stock price volatility risk increases and the stock price volatility becomes more intense.(3)Under the condition of different participation,the more active the market is,the more violent the fluctuation of stock price is.(4)Compared with non-state-owned enterprises,the stock price of state-owned enterprises fluctuates more violently after equity pledge.(5)In different industry background,compared with other industries,stock pledge will lead to more volatility of stock price in the secondary industry,while the share price in the tertiary industry is more stable.In the analysis of the research results,we find that the stock price fluctuations that caused by the pledge of controlling shareholders' equity are mainly caused by the information asymmetry and the problems of company operation,so we put forward corresponding strategies from different perspectives of investors,financial institutions,regulators and companies,so as to provide reference for enterprises or investors.