Research On The Causes And Economic Consequences Of Controlling Shareholders’ Equity Pledge

In the opinions on further improving the quality of listed companies issued by the State Council in 2020,it is emphasized that "we should actively and steadily resolve the risk of stock pledge of listed companies".As a necessary way for major shareholders to alleviate financial difficulties,equity pledge has been popular in China’s capital market since 2015.However,with the frequent occurrence of high proportion of equity pledge behavior,it gradually leads to serious pledge risk.Listed companies may have bad events such as stock price crash,control transfer and being hollowed out by major shareholders,which aggravates the fluctuation of individual stock price and disturbs the order of capital market.Under the policy background that the state attaches great importance to the behavior of equity pledge,this paper will select Hongtu high tech as a typical case to study the motivation and economic consequences of equity pledge of controlling shareholders.The purpose of this paper is to find out the specific problems in the combination of theory and practice of company value under equity pledge,so as to make listed companies alert to the risk of equity pledge;Hope to help investors understand the access to information of listed companies and research methods,understand the advantages and disadvantages of controlling shareholders’ equity pledge behavior,timely adjust investment strategy;It is expected to promote the more stable and healthy development of listed companies,and provide some reference for standardizing the order of the securities market.The particularity of the case of Hongtu hi tech lies in the fact that the time of equity pledge of major shareholders naturally forms two stages;Secondly,this paper will study the economic consequences of controlling shareholders’ equity pledge on the company from the four dimensions of company value,financial performance,market value and financial risk;Then it explores the mechanism of the corresponding economic consequences of equity pledge;Finally,some suggestions are put forward: first,the company should optimize the ownership structure,contain the absolute control of major shareholders,strengthen internal supervision,and safeguard the interests of the company and all small and medium shareholders;Second,strengthen the supervision and management of functional departments,improve the illegal cost of equity pledge,and have a deterrent effect on malicious pledge motivation;Third,broaden the financing channels,improve the financing channels of the securities market,so that pledge financing is no longer the primary choice for enterprises,especially private enterprises.This paper focuses on the following conclusions by studying the behavior of equity pledge of the controlling shareholder of Hongtu hi tech.Firstly,there are three motivations for Hongtu hi tech’s equity pledge: one is financing demand motivation;One is to maintain the status of control,the other is to transfer interests.Second,in the early stage of Hongtu hi tech development,the motivation of equity pledge is positive,which will help to improve the company’s performance;But in the heyday of the company’s development,with the deepening of the proportion of major shareholders’ equity pledge,equity pledge will always bring serious economic consequences to the company.On the surface,the company’s net profit has increased year after year,but each evaluation index has a downward trend,which finally reveals the company’s real business situation.Third,the pledge of Hongtu hi tech shares will naturally separate the control rights and cash flow rights of the major shareholders;Pledge financing makes up a certain investment cost and reduces the tunneling cost.When the major shareholders show malicious pledge motivation,it will intensify the principal-agent problem,induce the controlling shareholders to transfer the interests of listed companies through related party transactions,inefficient investment and other ways,which will greatly affect the normal operation of the company,and eventually produce negative economic consequences.