Research On The Financialization And Economic Consequences Of Entity Enterprises Under The Pledge Of Controlling Shareholders’ Equity

Affected by the epidemic and the financial crisis,the world economic landscape is undergoing major adjustments,and overall demand growth is slowing down and innovation drives competition.At the same time,the decrease of demographic dividend and the imbalance of supply and demand structure have greatly changed the internal support of China’s economic development.Under the profound changes in the internal and external economic environment,the external economic growth model that underpinned reform and opening up has become unsustainable,and it is urgent to deepen the structural reform of the supply side and promote high-quality economic development.Deleveraging,as the core task of economic reform,is an important hurdle that must be crossed to prevent and defuse major financial risks and smoothly transform the mode of economic development.Under the tone of "deleveraging and risk prevention",major regulatory agencies have successively introduced a series of measures to strictly regulate financial market trading activities,further increasing the difficulty of financing for private enterprises.In the context of tightening financing,equity pledge financing has emerged in the capital market due to its advantages of low cost and less restriction,and once became the preferred method of financing for many enterprises.Normally,unlike other traditional financing methods,for a controlling shareholder,the pledge of equity has the advantage of raising capital without diminishing effective control,and this advantage precisely makes the equity pledge behavior of the controlling shareholder unable to be completely separated from the listed company.As a rational person,the controlling shareholder may affect the company’s investment decision out of self-interested motives such as the private interests of control rights and the prevention of the transfer of control rights after the equity pledge.Compared with industrial investment,financial investment can not only provide excellent convenience for major shareholders to "Tunnel",but the huge gap between them in the return rate and payback period can also enable enterprises to quickly improve operating performance in the short term.However,the "two-sidedness" of financial investment also determines that companies must face and bear the huge financial risks brought about by price fluctuations and the risks of squeezing industrial investment that damage their long-term development capabilities.According to the "reservoir" theory,the proper holding of financial assets by entity companies is conducive to alleviating short-term funding constraints and supporting the development of main businesses.However,when a real enterprise leaves its main business and presents a state of excessive financialization,the "crowding-out effect" of financial investment on industrial investment will not only have a great negative impact on the long-term sustainable development of the enterprise,but also disrupt the smooth operation of the entire real economy and cause Systemic financial risks.With the gradual deepening of the financialization of my country’s real enterprises,the supervision of the financial market by the supervisory authorities has also increased.The "Pledge New Regulations" introduced in 2018 strictly regulate the equity pledge business in terms of the nature of the merging party and the use of the funds,aiming to further focus on the positioning of the financial services in the real economy.Based on this,this article takes Shanghai RAAS as a typical case to explore the relationship between the controlling shareholder’s equity pledge and the financialization of the company at the micro level,and makes reasonable suggestions on the economic consequences caused.The research found in this article:(1)When the controlling shareholder’s equity pledge ratio is in line with the market average or moderately low,the risk of transfer of control is low and the entity is in a low level of financialization,with the company focusing on its main business development and continuously improving its core competitiveness.(2)When the controlling shareholder’s equity pledge ratio is significantly higher than the average market level,the controlling shareholder’s speculative motive to stabilize the share price increases under the pressure of high risk of transfer of control,and the company shows excessive financialization,with the tendency of "go out of business",financial assets seriously squeezing the real investment,and operating performance significantly declining.(3)When the controlling shareholder’s equity pledge ratio is significantly reduced,the degree of financialization of the enterprise is significantly adjusted downward,and the company gives up financial capital investment and returns to industry,refocuses on the development of its main business and gradually improves its operating performance.This article innovatively uses the equity pledge as an entry point of view to conduct an in-depth discussion on the inducing factors of the financialization of entity enterprises.It not only enriches the research related to the influencing factors of financialization and the economic consequences of equity pledge,but also provided an incremental basis and reference for the regulatory authorities to further regulate the operation of equity pledge business,strengthen the governance of the source of entity financialization,and promote the transformation of the industrial core to the real economy.