Research On The Motivation And Economic Consequence Of ST Kangde Stock Pledge

Compared with other financing methods,equity pledge is gradually favored by listed companies due to its advantages of low requirements,fast process,few constraints and low cost.As of December 31,2019,more than 80% of enterprises in the A-share market have pledged equity to different degrees.While solving the problem of enterprise financing,high-frequency pledge of equity also brings many risks,and the economic consequences of different pledge motives are also different.In particular,the pledge of controlling shareholders’ equity may encroach upon the interests of minority shareholders and bring negative economic consequences to enterprises.This article selects the ST Kangde,for the case study object,with its relevant financial data from2010 to 2019 as research samples,motivation and economic consequences of controlling shareholder equity pledge,to strengthen corporate governance and risk prevention to provide reference for the enterprise,at the same time for the market regulators to strengthen the supervision of the risk of equity pledge to provide the reality basis.This article first of all to our country A share market and ST Kangde institute in the material industry of the stock pledge status of a brief description.Secondly,ST Kangde is taken as the research object to explore the mechanism and economic consequences of its equity pledge.The research finds that the motivation of equity pledge of ST Kangde is mainly driven by the company’s development strategy,business expansion financing needs,maintaining control and the major shareholders’ interest encroachment.At the same time,it explains the economic consequences caused by equity pledge from the external and internal dimensions.In terms of the external market,three representative pledge days,namely,the first pledge,the high-frequency annual pledge and the last pledge,were selected after the company went public.By using the event study method,it was found that the pledge of equity shares sent a significant negative signal to the market.In terms of internal economic consequences,this paper makes a comprehensive and systematic analysis from three aspects: business structure,financial performance and corporate governance,and finds that when equity pledge satisfies the expansion of part of the company’s business,the company suffers from deterioration of cash flow,increased risk of debt default,decline of profitability and corporate governance,etc.Accordingly,this paper puts forward the governance countermeasures and improvement suggestions of equity pledge from the perspective of external supervision and internal control,so as to provide a reference for enterprises to reasonably use equity pledge and avoid and prevent the risks it brings.