Research On The Motivations And Economic Consequences Of Equity Pledge Of *ST Liyuan

In recent years,China’s financial supervision has been strengthened and the financial market has gradually improved.On the one hand,the effect of supply-side reforms is obvious,the national public budget is stable,and the disposable income of residents continues to grow;on the other hand,local government debt constraints are strengthened,and the leverage structure has shown an optimized trend.However,in the “deleveraging” market environment,companies have the problem of “financing is difficult and expensive”.At this time,equity pledge stands out as a low-cost and high-efficiency financing method.The A-share market is almost “no shares without pledge”..For listed companies,equity pledge can solve the company’s shortage of funds,and the company’s major shareholders do not need to sell equity to raise funds,and they will not change their control rights,voting rights,or even have to sell equity due to reductions in holdings.For the financial market,equity pledge largely avoids the risk of market pressure caused by selling equity due to a shortage of corporate funds.However,the unilateral decline in stock prices is likely to trigger an equity pledge crisis,and there is a high risk of "explosion".The equity pledge crisis has detonated since 2018,and companies have been forcibly liquidated one after another.This paper analyzes the process,motive,economic consequences and the reasons of the pledge of its stock rights.The purpose of studying this case is to deeply analyze the problems hidden behind the equity pledge financing of the controlling shareholders of the listed company,to seek effective "lightning avoidance" methods,and to provide effective reference for other listed companies.When the equity pledge market was the largest in 2018,the market value of equity pledge once reached 6 trillion yuan.However,with the country’s deleveraging and the release of the most stringent new pledges,the scale of equity pledges has declined in 2019.As of December 31,2019,the total market value of pledges was 4.5trillion yuan.At the end of 2020,the total market value of pledges has shrunk again by 4.4%.As of February this year,the total market value of equity pledges was 4.16 trillion yuan.It can be seen that the scale of equity pledge in the A-share market has been significantly reduced.The situation of volume reduction and quality improvement is very obvious.At the same time,we should not relax our vigilance because of the gratifying situation of reducing the amount of equity pledges and improving quality.There is still an equity pledge crisis in the market,and the research on equity pledge still has strong practical significance.This article takes *ST Liyuan as a case to analyze the process of its equity pledge,the motivation of the pledge,the economic consequences after the outbreak of the equity pledge crisis and the reasons for these economic consequences.The purpose of studying this case is to deeply analyze the hidden problems behind the equity pledge financing of the controlling shareholders of listed companies,and the possible economic consequences,and to give warnings to other listed companies.