Research On The Motivation And Economic Consequences Of Controlling Shareholder’s Equity Pledge

With the continuous development of the social economy,many enterprises are facing financing difficulties and liquidity shortages.The root cause of this problem is that enterprises do not have enough assets,such as houses,land and other immovable property,to propose reasonable risk mitigation methods to financial institutions such as commercial banks.As an innovative financing method,equity pledge financing has the characteristics of low threshold,high convenience and rapid investment,and has become the first choice of many private listed companies.Since 2013,equity pledge in Shanghai and Shenzhen has been prevalent.In recent years,due to the downturn in the stock market,the frequency of equity pledge of the company’s controlling shareholders has become more and more frequent,and even led to the forced liquidation of pledged equity,the forced transfer of management rights,and the continuous emergence of things that encroach on the interests of small and medium-sized shareholders,which have emerged one by one,seriously affecting the healthy environment of the market.With the increasing prominence of equity pledge,it is particularly important to study the motivation and economic consequences of controlling shareholders’ equity pledge business.This can not only provide more theoretical support for scholars and promote the research on the company’s control of shareholders’ equity pledge business activities,but also put forward important references and references for companies in the same industry.This paper first expounds the concepts of controlling shareholders and equity pledge,and sorts out the impact mechanism between equity pledge on the company’s market response,financial performance and company value by combining the principal-agent theory,information asymmetry theory,signal transmission theory,and optimal financing theory with the research content of domestic and foreign scholars.Then,the current situation and characteristics of equity pledge in China and the communication industry are introduced,the process of equity pledge of the controlling shareholders of Dafu Technology is sorted out,and the real motivation of the equity pledge of its controlling shareholders is to broaden financing channels to obtain financing and benefit encroachment.Secondly,through the event research method,financial index analysis method,and calculation of Tobin’s Q value and EVA value,the economic impact of Dafu Technology’s equity pledge is deeply explored from multiple perspectives.After a series of studies,the author came to the following conclusions: first,the main motivation of the controlling shareholders of Dafu Technology to pledge their shares is to obtain financing;Second,by using equity pledge financing,Dafu Technology not only realized the original intention of equity pledge,but also improved the company’s solvency and operating ability;Third,the announcement of equity pledge business has increased the company’s stock price in the short term,but it has not really fundamentally increased the company’s value in the long run;Fourth,equity pledge enhances the willingness of controlling shareholders to hollow out listed companies,and controlling shareholders can easily use their controlling position to use related party transactions to erode the interests of the company,which greatly affects the economic benefits of the enterprise.Finally,according to the conclusions,relevant suggestions are put forward from the perspectives of listed companies,regulatory authorities and investors,hoping to give some enlightenment to the equity pledge behavior of listed companies in the same industry.