Research On Risk Control Of Equity Pledge By Controlling Shareholders In Environmental Protection Industry ——Taking AnhuiShengyunEnvironmental-Protection Group Co.,Ltdas An Example

As an emerging financing method,equity pledge stands out due to its advantages of low threshold,few restrictions,fast process,convenient procedures,and it once flourished under the background of credit tightening and strict approval.However,the environmental protection industry is restricted everywhere on account of the characteristics of large capital demand,self-financing,long operation cycle,and slow investment returns,that is the reason why the whole industry is eager to financing through equity pledges.But equity pledge is not a foolproof solution.While it providing financing convenience for environmental protection enterprises,risks also follow.In the past few years,many enviromental listed companies have moved forward with heavy burdens at a time of crisis.Therefore,it is very urgent to study the risk control of equity pledges in the environmental protection industry.Based on the review of previous equity pledge literature and the study of risk control theories,this paper takes the capital needs,financing difficulties,and pledge status of the environmental protection industry as the starting point,takes Shengyun Environmental-Protection Group Co.,Ltd as a case,studies its pledge process,annual reports and announcements,and finds that there are many risk points.This paper comprehensively uses the event study method,financial ratio analysis,Z-score model,and multiple linear regression model to identify the main risks:（1）The frequent pledge behavior of the controlling shareholders of Shengyun EnvironmentalProtection leads to the risk of the stock price collapse,the negative market reaction and the continuously falling stock price;（2）Equity pledge causes financial risks for Shengyun Environmental-Protection:declining profitability,shrinking solvency,stagnant operating ability,worrying growth prospects,and severe bankruptcy risk;（3）High equity pledge ratio leads to moral hazard,and the controlling shareholders frequently occupy funds illegally through related transactions,illegal guarantees,offbalance-sheet loans,etc.,endangering the interests of the company.Combined with the macro and micro environment of the environmental protection industry,this paper analyzes the causes of the risks:the overall tightening of the macro environment,the limitations of the environmental protection industry,the dislocation of supervision inside and outside the company,and the catalytic transmission of a high percentage of pledges.To sum up,based on the above analysis,this paper provides various suggestions for the risk control of equity pledges in the environmental protection industry.First and foremost,listed companies should restrain shareholders’behaviors and improve internal control.Introduce state capital to become a shareholder and pay attention to the reasonable collocation of financing;Focus on the financial condition and ensure steady expansion.Furthermore,the supervision department should perfect the information disclosure system,strengthen the examination and supervision of information,restrict the pledge of shareholders’ rights and increase the punishment for breach of contract.Meanwhile,it is also necessary to grasp the characteristics of the industry and lay emphasis on the industry environment.Ultimately,financial institutions should improve the stock access threshold,control the audit process strictly,pay attention to the pledged stock attributes,and calculate the pledged price scientifically.