The Research On The Influence Of Controlling Shareholders’ Equity Pledge On Corporate Value

Since 2013,the fast and efficient equity pledge financing method has been sought after by more and more controlling shareholders of listed companies,and the overall pledge scale of the capital market has expanded rapidly.However,equity pledge is not risk-free.In the second half of 2015 and the beginning of 2018,the stock market generally weakened and the stock price continued to fall.Listed companies faced the crisis of forced liquidation and stock price collapse due to the aggressive pledge of equity by controlling shareholders,which aroused the attention of all parties in the capital market.Controlling shareholders still hold the control right after the pledge of equity,but the cash flow right is occupied by the pledgee,which leads to the deviation of the two rights.On the one hand,the small cash flow right reduces the cost of controlling shareholders transferring the company’s resources,increases the degree of interest encroachment,and damages the value of the company.On the other hand,due to the private interests of control and the value of shell resources in the stock market,the possibility of interest encroachment of controlling shareholders during the pledge period is very small.The risk of control transfer is the main threat to the controlling shareholders and the listed companies.However,in order to prevent the transfer of control,controlling shareholders may pay too much attention to the short-term stock price performance,resulting in short-sighted behavior and damaging the value of the company.It is also possible to strengthen corporate governance under the supervision of the pledgee and take market value management measures to improve the company’s value,so as to maintain the company stock price in the long term.In brief,to explore and study the impact of the controlling shareholder’s pledge on listed companies,and analyze the underlying reasons behind it,which can not only enrich the research in relevant fields in theory,but also provide a certain theoretical basis for regulators to further improve the equity pledge supervision system,listed companies to reasonably monitor the controlling shareholders’ equity pledge behavior and protect the interests of investors.Based on the development status of equity pledge business in the domestic capital market and combined with relevant research status at home and abroad,this paper deeply analyzes the influence of controlling shareholder’s personal financing behavior on corporate value under the background of equity pledge,and mainly explores the following issues.After the equity pledge,will the controlling shareholders take advantage of the listed company’s resources or take short-sighted actions to damage the company’s value? Or strengthen corporate governance under the supervision of the pledgee,and take market value management measures to ensure the safety of the pledged equity,so as to increase the value of the company?Focusing on the main issues of this paper,qualitative analysis is carried out using the principal-agent theory and the theory of private interests of control rights.Based on the sample data of listed companies in the Shanghai and Shenzhen A-share markets from 2014 to 2020,the empirical analysis method is used to test whether the pledge of equity by controlling shareholders will have a negative impact on the value of the listed company,and to verify the mechanism behind it.The dissertation concludes below:First of all,the equity pledge of controlling shareholders damages the company’s value,the higher the pledge ratio,the lower the company’s value.Further research finds that,compared with the continuous pledge group,the controlling shareholder’s equity pledge in the non-continuous pledge group has a more obvious effect on the damage of corporate value.The conclusion of this paper is still valid after the robustness test of using the substitution variable method and changing the control variable group.Second,during the period of controlling shareholders’ equity pledge,the large shareholder’s interest encroachment effect caused by the greater separation of control right and cash flow right,the short-sighted behavior induced under the pressure of control right transfer risk are two important reasons for the controlling shareholders’ equity pledge to damage the value of the company.Further research shows that the two mechanisms of controlling shareholders’ equity pledge damaging corporate value have complementary effects to a certain extent.The conclusion of this paper is still valid after the robustness test of the method of substitution of variables and changing the sampling method.