Research On Financial Distress Forecasting Ability Of Equity Pledge Information

In recent years,the financial security index(FSI)of China's non-financial listed companies has been on a downward trend.In 2018,the FSI total index was 5223.21 points,down 90.21 basis points or 1.7% from the previous year.According to the CSMAR database,from 2016 to 2018,there were 175 ST/PT listed companies with shares A and B in China,which not only brought heavy losses to related enterprises,employees and investors,but also undermined the stable and high-quality development of China's market economy.Facing the increasing financial risks of listed companies,it is more and more important to accurately and timely predict the financial difficulties of enterprises.At the same time,China's listed companies shareholders equity pledge financing is increasingly fierce,in recent years,almost to the "no shares do not bet".As the actual controller of the enterprise,the essence of the pledge of the controlling shareholder's equity is a fund-raising activity,whereby the controlling shareholder either hollowed out the enterprise or invested the capital into the enterprise to help its development,which has a positive or negative impact on the enterprise value,so is the behavior related to the future financial situation of the enterprise? Can the pledge of controlling shareholder's equity be regarded as corporate governance information and added into the financial distress prediction model to improve the prediction ability of the model?Based on this,this paper takes the pledge of controlling shareholder's equity of a-share listed companies in Shanghai and shenzhen from 2009 to 2015 as the research object to investigate and analyze its incremental effect on the prediction of financial distress in three years(2012-2018).Specifically,this paper selects 15 financial variables that can respectively reflect the profitability,development ability,operation ability and debt paying ability of enterprises.With the help of factor analysis,the "factor-logit" model is constructed to compare the model prediction ability based on financial variables with that after adding the controlling shareholder's equity pledge variables.This paper introduced the test and answer one by one of the following propositions: first,based on financial ratios for the enterprise to set up a financial distress prediction model,the model for the basis of the controlling shareholder equity pledge information increment model was constructed,and test the difference between two model prediction accuracy,to judge whether the join of the controlling shareholder equity pledge information can improve the prediction accuracy;Second,is the incremental effect of controlling shareholder's pledge information on financial distress prediction influenced by other factors? For this reason,this paper divided the samples into groups according to the nature of the enterprise,the degree of corporate equity balance,the level of corporate governance,and the geographical location of listed companies,and made a cross-sectional analysis of the incremental role of the financial distress prediction of the controlling shareholder's equity pledge information.The empirical results show that adding the controlling shareholder's pledge variable into the basic model can significantly improve the prediction accuracy of the model.This result is still valid after a series of robustness tests,such as changing the measurement method of financial distress,changing the control variables,and controlling the endogenetic problem with PSM,indicating that the main conclusions of this paper are somewhat robust.Cross section analysis found that group in non-state enterprises,equity checks and balances the group of low and high level of corporate governance and the eastern region in the way,the controlling shareholder equity pledge the correlation between information and enterprise whether future financial predicament is stronger,the prediction precision is higher,shows that the controlling shareholder equity pledge information on financial distress prediction of incremental effect is influenced by other factors.The research conclusion of this paper not only enriches the research on the pledge of controlling shareholders' equity,but also expands the index selection range of financial distress prediction,which can help investors optimize investment decisions to a certain extent.Most of the previous studies analyzed the pledge of controlling shareholders' equity in isolation and the prediction of financial distress.The analysis of this paper preliminarily revealed the relationship between the two,and the conclusion is to some extent conducive to the relevant regulatory departments to formulate relevant policies.In addition,the conclusion of this paper proves that the pledge of controlling shareholders' equity on the whole can effectively reduce the probability of enterprises getting into financial difficulties,further illustrates the importance of controlling shareholders on corporate control right,and enrichees the relevant literature on the economic consequences of equity pledge.