Research On Controlling Shareholder’s Equity Pledge,Earnings Management And Debt Financing Cost

At present,listed companies in China are generally facing the problem of financing difficulties.Equity pledge financing is an effective way to solve the problem,which has been recognized by both sides of the pledge and rapidly developed in the capital market.At the same time,it also implies certain risks and affects the interests of multiple parties.Due to the fact that the controlling shareholder is the dominator and the biggest beneficiary of a listed company,when the pledgor is the controlling shareholder,the risks and negative impacts of equity pledge are more likely to attract the attention of stakeholders.Scholars have paid more attention to the negative impact of the transaction of controlling shareholder equity pledge on the company’s internal environment,while there have been few studies on its impact from an external perspective.Debt financing is the main financing channel for listed companies and shareholders to obtain more funds,and the level of debt financing costs also affects corporate decision-making.Therefore,it is important to study the impact of equity pledge by controlling shareholders on debt financing costs and the mechanisms involved based on the external perspective of creditors.Earnings management is not only the direct economic consequence of equity pledge,but also an important factor affecting debt financing cost.There is room for research on the role it plays between the two.Taking earnings management as a bridge,this paper explores the relationship between controlling shareholder’s equity pledge and debt financing cost and the mechanism,and analyzes the differences between the role of accrued earnings management and real earnings management.It is expected to provide inspiration and reference for improving the relevant market mechanism.Based on the principal-agent theory,information asymmetry theory,incomplete contract theory and private benefits of control theory,the paper uses literature review method,empirical analysis method and normative analysis method,selects the data of 2012-2021 A-share listed companies to study the relationship between controlling shareholder’s equity pledge and debt financing cost,and explores the different roles of accrual earnings management and real earnings management.The empirical results show that listed companies with controlling shareholder’s equity pledge have higher debt financing costs,and the higher the proportion of pledge,the higher the debt financing costs;Controlling shareholder’s equity pledge is positively related to accrual earnings management and real earnings management;Accrued earnings management plays an intermediary role between controlling shareholder’s equity pledge and debt financing cost,while real earnings management plays a masking role.Based on the above conclusions,the paper puts forward suggestions to improve the equity pledge system,control the degree of earnings management and enhance the creditor’s awareness of prevention,hoping to promote the sound and standardized operation of the capital market.