Research On Enterprise Share Repurchase Behavior After Equity Pledge

Under the influence of the appearance of "no stock without pledge" in the A-share market in 2018,equity pledge risks continue to emerge.During this period,after the entering of "Start-up Law",the demands for redemption of listed companies in China have been depleted,resulting in a boom in share repurchase by a large number of enterprises.In this context,more and more listed companies carry out share repurchase after the pledge of controlling shareholders’ equity.However,existing research shows that equity pledge is a mean for enterprises to alleviate their financing needs,while share repurchase requires financial support.Therefore,why share repurchases are carried out under the equity pledge of controlling shareholders,and whether share repurchases can work.Based on these,this paper studies the share repurchases of companies under the equity pledge of controlling shareholders.This article,based on the grounded theory,takes Beijing Creative as the research subject and related researchs are carried out from the following aspects:(1)The agents of redemption in companies after the pawn of controlling shareholders’ pledge.(2)If the equity pledge behavior of the controlling shareholder has an effect on the share repurchase.(3)The interfering factors of the result of share repurchase in enterprises under the pledge equity.Through reading a large amount of materials,I have summarized the basic situation of equity pledge and share repurchase in China.I have collected and analyzed the original data using Guo Taian database,Oriental Fortune Choice financial terminal,and enterprise annual reports to clearly reveal the motivation and effect of share repurchase under equity pledge by controlling shareholders.The research finds that:(1)The motivation for Beijing Creative to repurchase shares under the pledge of controlling shareholders’ equity is to increase stock prices and avoid the risk of equity pledge.(2)Share repurchase produces market influences,management influences,and financial influences.(3)The effect of share repurchase is affected by various factors,high proportion of equity pledge makes the industry less competitive,issue repurchase plans in advance,a larger scale of repurchase,increased shareholding by the management of the enterprise before repurchase,more free cash flow,more positive investor sentiment,and higher information disclosure quality,the better the effect of share repurchase.Possible contributions and innovations of this article:(1)In terms of research ideas,existing research rarely focuses on the motivation of share repurchase in terms of equity pledge.This article attempts to use the method of case study,selecting the case of Beijing Creative Share Repurchase,to analyze the share repurchase behavior of listed companies under equity pledge,providing certain case support for subsequent share repurchase research.(2)In terms of research content,there has been little in-depth discussion in the existing literature on the smooth implementation of share repurchase under equity pledge and the influencing factors that have different effects after implementation.By comparing two share repurchases,this article makes a relatively complete summary of the factors affecting the effect of share repurchases under the pledge of controlling shareholders’ equity,providing a new way of thinking for studying share repurchases,and also facilitating investors to conduct a comprehensive analysis of share repurchases.