| The controlling shareholder’s equity pledge can ease his financing constraints,but it can also aggravate the company’s financing constraints due to the increase in information asymmetry with external fund providers.Meanwhile,the degree of separation between cash flow rights and ownership is increased and it may boost the motivation of “tunneling”,thereby affect the company’s performance and financial condition.Therefore,external creditors,as homo economicus,may respond to the pledge behavior and demand a higher risk premium.The thesis discusses the economic consequences of the controlling shareholder’s equity pledge behavior from the perspective of external creditors,and explores whether the behavior will cause creditors to demand higher risk compensation,thereby resulting in higher debt financing cost of the company.The thesis starts with two methods: empirical research and case analysis.In terms of empirical research,it conducts a regression study on whether there is a positive relationship between the controlling shareholder’s equity pledge behavior and debt financing cost,taking A-share listed companies from 2014 to 2020 as a sample.And on this basis,it further discusses whether internal equity restriction and external audit quality have a negative moderation on the rising cost of debt financing.In order to maintain the stock price and prevent the liquidation risk,the controlling shareholder has the motivation to implement real earnings management and the reliability of Financial Statement will be reduced.Then it will increase the information asymmetry,and thus increase the cost of debt financing.To this end,the thesis further discusses the mediating effect of real earnings management.Towards the case analysis,ST Guiren whose controlling shareholder frequently pledged equity is selected as the object.The thesis observes the changes in debt financing costs during the pledge,as well as the effect of equity restriction,audit quality and real earnings management to present and corroborate the conclusions of the research.Based on the empirical evidence and the case study of ST Guiren,the thesis draws the following conclusions: 1.The controlling shareholder’s equity pledge will increase the company’s debt financing cost,and the higher the equity pledge ratio,the higher the debt financing cost.2.Equity restriction has a negative moderating effect on the positive relationship between the controlling shareholder’s equity pledge and the cost of debt financing.3.High-quality audit has a negative moderating effect on the positive relationship between controlling shareholder’s equity pledge and debt financing cost.4.Real earnings management acts as a mediator between controlling shareholders’ equity pledge and debt financing cost.A high equity pledge ratio will increase the level of real earnings management and companies with high-level real earnings management will have higher debt financing cost.Based on the research above,the thesis puts forward policy suggestions to reduce the risk of equity pledge and reduce the cost of debt financing. |
