The Influence Of High Proportion Equity Pledge Of Controlling Shareholders On Company Value

Due to the rapid expansion of the scale of enterprises in recent years,the pressure on the company’s cash flow has continued to increase,coupled with the increasingly stringent domestic financial supervision,traditional financing methods have been increasingly restricted.Equity pledge has become the primary choice for many listed companies in financing due to its advantages of low financing threshold,simple procedures,and low financing costs.Shareholders of the company can use equity pledges to convert their equity into liquid funds without affecting their own control rights.This not only can effectively alleviate the pressure on funds,but also achieve full use of resources to solve the problem of listed companies and shareholders themselves.liquidity crisis.However,with the increasing proportion of controlling shareholders’ equity pledges,corporate crises frequently occur.Although my country’s regulatory authorities have continuously introduced new policies,hoping to stabilize the market by restricting equity pledges,the potential risks of equity pledges still pose a huge threat to the company.When the controlling shareholder pledges his own equity in a high proportion,if the stock market fluctuates sharply,or the company has serious negative news,the company’s stock price will plummet.When the stock price falls below the liquidation line,the pledger needs to quickly replenish it.Margin or supplementary pledge,otherwise the pledge party will close the position.This will not only have an impact on the liquidity of the controlling shareholders,but will also harm the interests of listed companies and adversely affect the company’s value.Therefore,this article conducts research on the influence of controlling shareholder’s high-proportion equity pledge,and understands its influence on the company’s value,which can provide certain reference suggestions for investors and regulators.This paper selects the company with the highest equity pledge ratio in the decoration and decoration industry—Meizhi Co.,Ltd.as the research object,and conducts research on the core of "the influence of the controlling shareholder’s high proportion equity pledge on the value of the company".The article combs the relevant domestic and foreign literature,introduces the situation of the equity pledge of Meizhi shares,analyzes the motivation of the controlling shareholder’s equity pledge,uses Tobin’s Q value and economic value added to describe the value of the company,and compares the selection of different equity pledge ratios.Enterprises measure the impact of controlling shareholder’s equity pledge on company value,and then proceed from the four influence paths of principal-agent theory,controller’s private interest theory,information asymmetry theory,and signal transmission theory to conduct an in-depth analysis of the impact of equity pledge.The article draws the following conclusions: 1)The high proportion of equity pledge by the controlling shareholder of Meizhi Co.,Ltd.has a negative impact on the value of the company;2)The equity pledge by the controlling shareholder will cause the separation of cash flow rights and control rights,and the second type of agency problem is more serious.3)The pledge of shares of the controlling shareholder of Meizhi Co.,Ltd.caused downward fluctuations in the stock price in the short term,resulting in a decline in the value of the company.Based on the conclusions of this article,suggestions are made from three levels:company,legal,and financial institution.At the company level,it is recommended to restrict the voting rights of controlling shareholders after a high proportion of equity pledges,strengthen the company’s risk management,and enhance the independence of the board of supervisors.At the level of financial institutions,it is recommended to strictly supervise the equity pledge business evaluation process and strengthen the follow-up monitoring of the use of funds.At the legal level,it is recommended to introduce a more stringent information disclosure system,limit the frequency and ratio of single shareholder equity pledges,and increase penalties for violations of laws and regulations.