Research On The Impact Of Shanghai RASS Stock Pledge On Company’s Financial Performance

The so-called equity pledge refers to the shareholders of the company mortgage the equity of the company to the corresponding financial institutions,and then exchange their mortgaged equity into an equal amount of funds to conduct financing for the company.Equity pledge is very favored by the management of listed companies in today’s capital market,mainly because compared with other financing means,equity pledge financing is fast,does not need many complicated procedures and the amount of funds obtained..At present,in the whole domestic A-share market,equity pledge financing shows a thriving trend.According to statistics,by the end of September 2019,there were more than 3,100 companies participating in the equity pledge,accounting for about 86.6% of 3,659 A shares,while about 13.5% did not participate in the equity pledge.Although the equity pledge is active in the whole capital market with its absolute advantage,anything will have two sides,and the equity pledge is no exception.After the management of a listed company makes the equity pledge,a large amount of funds will promote the company’s decision makers to make more radical decisions,such as mergers and acquisitions,investment,etc.However,often this kind of behavior will make the company ignore the development of its main business.When the strategic direction of the enterprise deviates from the center,the corresponding risks will appear one after another,bringing an adverse impact on the company’s operation and sustainable development.At the same time,for external investors,when the invested company equity pledge,they will pay more attention to the reasons of the company equity pledge,but due to the untimeliness of information transmission,external investors will think that the company takes financing behavior,because the company has incomplete capital chain or shortage of funds.Investors are cautious about investing when they begin to guess the causal connection behind the company’s behavior.For the company,the lack of trust from investors will have a significant impact on the operation of their own company.Therefore,before making the equity pledge,the company must consider the company ’s development strategy and investment ability.The appropriate equity pledge will have a positive impact on the company’ s operation and performance,otherwise,it will bring a large number of risks.Based on the results of scholars at home and abroad,this paper introduces the motivation of equity pledge,the influence of equity pledge on company performance and the relevant theoretical basis of financial risk.By combining the views of scholars at home and abroad,this paper takes financial risk as the path which equity pledge bring to affect corporate performance,so as to explore its impact on corporate performance;and expounds the theoretical basis of this paper: principal-agent theory,information transmission theory,information asymmetry theory,control self-interest theory.Through the analysis,this paper reveals that there are three main causes of Shanghai Rass equity pledge: the investment demand of controlling shareholders,the demand of M & A expansion and the behavior of shareholders making profits for themselves.When the company has equity pledge,it will affect the performance of the company through its financial risk.In order to further refine the financial risk,this paper divides the financial risk into three categories.The first category is investment risk.When equity pledge occurs,large-scale securities investment and M & A will affect its investment risk and then affect its financial performance;the second category is liquidity risk.The impact of corporate performance is reflected by the implementation of credit policy and cash flow after equity pledge.The third category is financing risk.After equity pledge,the cross-border investment behavior of controlling shareholders and the transmission of financing signals will affect the financing risk and thus affect the performance of the company.Finally,the paper analyzes the solvency,profitability,operating ability,growth ability and EVA specific indicators of the company after equity pledge to reflect the impact of its performance.Through the analysis of the case,this paper draws the following conclusions: firstly,the investment risk brought by the high investment of the controlling shareholder after equity pledge will bring burden to the long-term operating performance of the enterprise;secondly,When the equity is pledged,in the face of high financing costs,shareholders may relax their company ’ s credit conditions to stimulate consumption by external consumers,thereby increasing short-term profit margins,but in the long run,accounts receivable due to credit sales The phenomenon that it is difficult to collect funds will affect the company ’ s financial performance while increasing the proportion of bad debts.Finally,the act of pledge of equity serves as a signal to send a large amount of capital demand to the market,which not only affects the views of investors,but also brings risks to the operation and management activities of listed companies,and has an impact on company performance.According to the conclusions above,this paper puts forward several enlightenment: firstly,controlling cash flow to ensure that the use of funds can promote the development of enterprises;secondly,controlling the implementation of credit,reducing the operating burden of enterprises;thirdly,reducing cross-border investment,stable investment can improve the profitability of enterprises.