A Study On The Causes And Economic Consequences Of Thepledge Of Controlling Shareholders In Listed Companies

In recent years,controlling shareholders have joined the army of equity pledges due to the consideration of obtaining funds for themselves or listed companies.The proportion of their pledges is getting higher and higher,and even after a high proportion of pledges,they still frequently release the old pledges.The reason is that,on the one hand,this method of financing has simple procedures,and the controlling shareholder can still retain control of the listed company after the pledge;on the other hand,the true destination of the funds obtained by the pledge is not strictly monitored.Affected by the macroeconomic downturn and the controlling shareholder's own financial embarrassment,equity pledge defaults in the A-share market have occurred from time to time.Negative examples of controlling shareholders reducing their holdings and hollowing out listed companies after their equity pledges are frequently disclosed.Undoubtedly intensified the volatility of the capital market.Therefore,an in-depth analysis of the motivation and negative effects of the controlling shareholder's equity pledge and the exploration of countermeasures will not only help the listed company,the pledge parties and other stakeholders to rationally understand the equity pledge behavior,so as to rationally use this financing method;it is also for supervision.The department provides regulatory reference,which has strong practical significance for the sustainable development of enterprises and the healthy operation of the capital market.Based on the theory of information asymmetry,principal-agent theory,and control theory,this article combs the existing related literature,takes the pledge of Jinlong's controlling shareholder's equity as the research object,and speculates on the holding by analyzing the financial behavior of the controlling shareholder and the listed company after the pledge.The motivation for shareholders to pledge equity,comprehensively use comparative analysis methods,event research methods,etc.to pledge continuous and frequent equity pledges to the controlling shareholder Golden Dragon Group and actual controllers from four aspects: short-term market effect,financial risk,financial performance,and company value.The economic consequences of listed companies have been specifically explored.Through a detailed analysis of the case of the controlling shareholder's equity pledge of Jinlong Electromechanical Co.,Ltd.,this article finds that:Firstly,under the influence of the actual controller Jin Shaoping,the controlling shareholder of Jinlong Electromechanical Co.,Ltd.,Jinlong Group and the concerted person Jinmeiou have accumulated more than 80 equity pledges between 2011 and2018,and the pledge ratio between 2016 and 2018 was as high as 99% or more.After analyzing the controlling shareholder's own situation and the financial behavior of the listed company and the actual controller after the equity pledge,it is found that the controlling shareholder of Jinlong Electromechanical Co.,Ltd.had pledged equity for the purpose of solving financing needs and interest encroachment.Secondly,after controlling shareholders of Jinlong Electromechanical Co.,Ltd.pledged their shares with a high percentage,negative economic consequences had brought to the listed company through the three paths of market value management,interest encroachment,and risk infection mechanism.This is manifested by the controlling shareholders' overstepping of internal control and external violation guarantees and related parties'.occupation of funds,the use of control rights to lead listed companies to carry out high dividends,and the use of pledge funds for high-premium mergers and acquisitions with related parties have increased the financial risks of listed companies,and the short-term market response had been sluggish,and financial performance and company value had dropped significantly.Specifically,first of all,due to the existence of information asymmetry,the market had a negative attitude towards the Jinlong Group's share pledge.The listed company was affected by the risk of controlling shareholders and lose high-quality customers,their financing channels had narrowed,their financing quotas had been reduced,and the risk of debt default had increased.Secondly,Jin Shaoping,the actual controller of Jinlong Electromechanical Co.,Ltd.,had provided guarantees for his related parties over internal control violations,and related parties' share of funds had made listed companies suffered additional losses;once again,controlling shareholders used their controlling position to lead the company to pay high dividends,which made the listed company's liquidity increasingly tight;finally,the controlling shareholders used the pledged funds for mergers and acquisitions to expand,which brought extremely negative effects to Jinlong Electromechanical Co.,Ltd..The failure of M&A assets to achieve the expected return has increased the financial pressure and operating risks of Jinlong Electromechanical Co.,Ltd..Substantial debt defaults occurred in certain years,and huge losses occurred in 2018.This has a huge impact on the company's sustainable development.During the period when the controlling shareholder pledged equity with a high percentage and high frequency,the listed company's solvency,profitability,operating ability,and development ability all showed a downward trend.The company's financial risks were increasing,and the company's value was declining year by year.Aiming at the current impact of the controlling shareholder Jinlong Group's equity pledge,this article proposes countermeasures and suggestions from three aspects: perfecting the internal governance of listed companies,improving the transparency of the pledge information disclosure of listed companies,and strengthening external supervision.