Research On The Motivations And Risk Prevention Of Equity Pledge Of Meisheng Culture

Equity pledges are frequently used for financing in companies.According to data of A-share market published on the Eastern Wealth website,as of July 30,2021,there were 2,528 companies pledging equity,accounting for approximately 58% of all the listed companies.The total number of pledged shares was 453,138 million,with the market value of 4.19 trillion yuan.The proportion of major shareholders’ equity pledges were 70%,and nearly one-third of pledged equities had reached the warning line or liquidation line.The phenomenon of high proportion of equity pledges is widespread,while hidden dangers behind it cannot be ignored.This paper selects Meisheng Culture as a case company.Based on the literature review,we analyze the motives of corporate equity pledge financing on both macro and micro perspectives,taking into account the economic transformation,the current situation of the industry and the actual situation of enterprises’ own development.We also further analyze the risks arising from it by using financial indicators,event analysis method,Z-score model,La Porta calculation method,etc..The study found that a high proportion of equity pledges is prone to financial risk,which in turn affects the long-term performance of enterprises and is detrimental to their stable development.It also causes stock market volatility,generates market risk and impairs the value of enterprises.In addition,equity pledges can increase the risk of transfer of control,threatening the overall sustainability of the business,and generate the phenomenon of separation of powers,which in turn will enhance the motivation of the major shareholder to empty out and lead to the problem of misappropriation of interests,damaging the interests of small and medium shareholders and even the whole listed company.Based on the above analysis,this paper proposes the following four risk prevention suggestions.First of all,enterprises should establish a sense of risk prevention and an early warning system to correct deficiencies in a timely manner.Secondly,enterprises also need to focus on improving their own core competitiveness,avoiding blind foreign investments,so as to reduce the frequency of equity pledge financing and mitigate fluctuations in corporate value.Once again,by compacting the main responsibility of the controlling shareholders and strengthening corporate governance,the controlling shareholders will be guided to return to focus on the core objective of enterprise operation and development.Finally,it is recommended that enterprises strengthen the construction of a system of checks and balances of rights,starting from the protection of the rights and interests of small and medium-sized shareholders,and at the same time adopt certain restrictions on the rights of large shareholders for the high proportion of equity pledges,so as to achieve the effect of safeguarding the overall interests of the enterprise in a two-pronged manner.The exploration of the case of Meisheng Culture enriches the research sample on the risk of equity pledges of listed companies and their prevention,helps to further study the role and pros and cons of equity pledges in the capital market,and provides a useful reference for regulating the equity pledging behavior of listed companies.