Study On The Economic Consequences Of Equity Pledges By The Controlling Shareholders Of Guanghui Automobile

Under the changing macroeconomic environment and the continuous adjustment of national financial policies,the capital market financing methods have been pushed forward,and equity pledges are gradually favored by the controlling shareholders of enterprises because of their unique advantages of low financing threshold and high efficiency.Based on the statistical data of Choice financial terminal database,as of December 31,2022,a total of 1,514 enterprises in China’s A-share market have pledged their equity shares,and the total number of pledged shares has reached 5504.4 billion,and there are even "no shares without pledge" and "all shares" in the securities market.The phenomenon of "pledging of all shares" even exists in the securities market.The outbreak of equity pledging has drawn attention from various aspects,why controlling shareholders are attracted to equity pledging as a means of financing,and whether the frequent occurrence of equity pledging can bring impact to listed companies and what impact it will have.Academics have started to conduct research on equity pledging behavior,and most scholars mainly use empirical analysis around the financial risk,surplus management,innovation input and corporate value of equity pledging,while controlling shareholders’ equity pledging is also accompanied by the question of the motivation behind it,which also leads to an increasingly prominent issue of economic consequences.Therefore,it is important to study the equity pledges of controlling shareholders and the resulting economic consequences.Firstly,the domestic and foreign research literature on equity pledges is reviewed and analyzed through a combination of literature,case study,comparative study and event analysis based on principal-agent theory,information asymmetry theory and separation of powers theory.The information obtained from its annual reports from 2012 to 2022 and relevant databases were used to analyze the motives of controlling shareholders’ equity pledges;finally,the economic consequences of controlling shareholders’ equity pledges of Guanghui Automobile were studied by using the event study method,calculating the degree of separation of two powers,Tobin’s Q value,economic value added and analyzing financial performance.The analysis found that:(1)The controlling shareholders’ equity pledges are mainly motivated by meeting capital needs,reducing risks and maintaining their control.(2)The high frequency and proportion of equity pledges will deepen the separation of control and cash flow rights of controlling shareholders and enhance the profit encroachment motive.(3)A high proportion of equity pledges by controlling shareholders for a long period of time sends a negative signal to the market that the company is short of funds,leading to a decline in the company’s share price.The company’s profitability,solvency,operating capacity and growth capacity have all declined significantly,and the value of the company has also declined.According to the problems of the research results,specific opinions are put forward:to improve the internal establishment of an early warning mechanism for the risk of equity pledges;to strengthen the disclosure of information on equity pledges;to strengthen the proportional restraint on equity pledges by controlling shareholders;and to strengthen the external supervision of the market,in the hope that it can play a reference role in improving the governance of listed companies in China and effectively protecting the rights and interests of small and medium shareholders,so as to prevent the negative impact brought about by equity pledging practices.