Research On The Motivation And Economic Consequences Of Tom’s Large Shareholder’s High Proportion Equity Pledge

The stocks of listed companies are easy to circulate and liquidate,which can reduce the risk of mortgage loans.Through equity pledges,listed companies can increase financing channels and obtain the required funds to ease financing difficulties.Therefore,in recent years,the equity pledge financing method is highly favored by major shareholders of listed companies in China’s A-share market.High ratio and frequent equity pledges can lead to two kinds of problems: on the one hand,major shareholders may use this method to cash out in disguise;on the other hand,the control and cash flow rights will be separated.These problems further reduce the cost of large shareholders’ infringement on other stakeholders,which in turn creates serious agency problems.It is of great practical value to study how the high proportion of equity pledges by major shareholders affects the market effect,the company’s operation and the economic consequences such as the value of the company,etc.At present,most of the academic studies on equity pledges are based on empirical studies to analyze the impact of equity pledges on one of the aspects of the company,and those that analyze the process of equity pledges by major shareholders,the motivation of the behavior and its economic consequences with real cases.The study is less frequent.This paper selects Tomcat,a company with frequent and high proportion of equity pledges by major shareholders,as a case study to explore how to regulate the behavior of major shareholders in companies with equity pledges in order to improve the effectiveness of internal corporate governance and external market regulation.Therefore,this paper studies the equity pledging behavior of the majority shareholder of Tomcat which has certain significance and value in theory and practice.This paper takes Tomcat as the case study object,based on the research idea of "identify the problem-clarify the problem-analyze the problem-solve the problem",and adopts the methods of literature analysis,case study and event study to conduct a case study on the motives and economic consequences of large shareholders’ high proportion of equity pledges.First,by combing the development of the equity pledge system,the current situation of equity pledge financing and the frequent occurrence of equity pledge defaults,it is found that a high proportion of equity pledge is a double-edged sword,which may have positive or negative economic consequences for the company.What,then,are the reasons for the different economic consequences? This establishes the research basis of this paper,followed by a further review of the literature related to the motives and economic consequences of equity pledges,which reveals that they may be correlated with the motives of pledges by major shareholders and corporate situations;secondly,through conceptual definition,theoretical elaboration and theoretical support,the analytical framework of the studied problem is further improved to provide theoretical guidance for the subsequent case studies;again,the case study section follows the In the case study section,we follow the research idea of "introduction of external macro background and internal equity pledge-analysis of pledge motives-analysis of economic consequences of pledge-path of economic consequences of pledge",and analyze and summarize the characteristics and pledge motives of major shareholders’ equity pledge by understanding the basic situation and equity structure of the company,based on which,we analyze the economic consequences of major shareholders’ equity pledge and the economic consequences of pledge.Finally,we summarize the above case studies and draw conclusions,and make relevant suggestions for listed companies and external market supervision,and further provide reference for other listed companies with high pledging ratios,and strengthen the awareness of small and medium-sized investors on risk prevention and control and early warning of large shareholders’ equity pledging behavior.The results of the study show that(1)capital needs drive persistent equity pledging behavior.(2)The intensification of the degree of separation of powers strengthens the profit encroachment motive.(3)A high proportion of equity pledging behavior brings many negative consequences.To address the impact of high proportion of equity pledges by Tomcat’s major shareholders on the company,this paper proposes countermeasures in terms of reasonably setting the "ceiling" of equity pledges,improving the company’s internal control system,perfecting the information disclosure mechanism of equity pledges,strengthening the supervision of multiple parties of equity pledges and increasing the cost of equity pledge violations.The research in this paper provides new ideas for stakeholders to identify the potential risks arising from the pledging of equity by major shareholders,and is also conducive to a reasonable understanding and appreciation of the economic consequences of the pledging of equity by major shareholders.