Research On The Motivation And Risk Prevention Of Equity Pledge Of Jiuzhitang’s Major Shareholder

Equity pledge has been widely favored by major shareholders since it officially entered Chinese capital market.However,in recent years,with the continuous expansion of the scale of equity pledge by major shareholders,the increase in the proportion of individual stock pledges and the incompleteness of relevant laws and regulations,the risk of equity pledge is gradually revealed.Although equity pledge belongs to the financing behavior of major shareholder,due to the information asymmetry between major shareholder and other stakeholders,it is inevitable that major shareholder will take advantage of information to seek private interests,and the market will regard equity pledge as a disadvantage signal.When the negative news related to equity pledge appears again and again,equity pledge will no longer be a neutral financing behavior in the eyes of the general public,and will be linked to problems in the company’s operation.In this context,it is very necessary to deeply analyze the motivation of the major shareholder’s equity pledge,accurately identify the risks of the major shareholder’s equity pledge,and take appropriate preventive measures.The major shareholder of Jiuzhitang has pledged equity since 2015,and the major shareholder’s pledge highest ratio was 99.44%.In order to alleviate the pledge risks,Jiuzhitang also took measures such as earnings management,but failure to fully protect against the risks.Taking Jiuzhitang as a case,on the basis of describing the current situation of its major shareholder’s equity pledge,this paper analyzes the characteristics of the case company’s major shareholder’s equity pledge,the implementation conditions and motivations of the pledge behavior to reveal the risks of the major shareholder’s equity pledge.And according to the existing equity pledge management system,from the internal level of the company,the individual level of major shareholder and the external level,it puts forward suggestions to prevent the risk of equity pledge by major shareholder.The study found that the motivations for equity pledge by the major shareholder of Jiuzhitang include: low interest rate for equity pledge financing,less restrictions on securities companies handling equity pledge,getting rid of the conditions of equity sale,the actual controller maintaining the equity of the listed company,the capital demand for personal expansion investment,and forced replenishment of collateral due to falling stock prices.The equity pledge of Jiuzhitang’s major shareholder has the following risks: market risk caused by passing unfavorable information,control transfer risk caused by forced liquidation,moral hazard caused by the large shareholder taking the opportunity to encroach on interests,and equity pledge caused the company’s value decline risk.In order to prevent these risks,the company level needs to optimize the internal supervision mechanism,establish a dynamic pledge risk assessment and warning mechanism,and consider introducing state-owned shareholders in a timely manner;the individual level of major shareholder should reasonably control the pledge ratio and strengthen the construction of personal moral quality;the external level should strengthen the control of equity and the supervision of pledge behavior,strengthen the supervision of equity pledge information disclosure,and improve the pledge risk warning and monitoring mechanism.The research results can provide a certain reference for the case company and other companies to prevent the risk of major shareholders’ equity pledge,and help to promote the healthy and orderly development of Chinese major shareholders’ equity pledge in the capital market.