The Influence Of Controlling Shareholder’s Equity Pledge On The Interests Of Small And Medium Shareholders

The essence of equity pledge is the behavior of stock owners pledge their shares to banks and other institutions or individuals for financing and paying interest expenses.The reason why more and more controlling shareholders choose equity pledge financing,even to the level of "no stock without pledge",is directly related to the characteristics of the equity pledge financing business itself.Equity pledge,as the name implies,just pledges the shares held by the controlling shareholder for financing.Financial institutions usually pay more attention to the situation of the pledged shares themselves,as well as the basic situation of the controlling shareholder itself.Moreover,compared with traditional financing such as bank loans,it is easier for financiers to obtain funds,and loans are released quickly.The most important point is that the controlling shareholder still has the decision-making power of the listed company corresponding to the pledged shares,while other types of mortgage loans do not have this advantage.According to wind statistics,as of November 3,2021,the number of A-share pledged shares was 480.736 billion shares,the market pledged shares accounted for 6.78% of the total share capital,and the market pledged market value was 4,314.578 billion yuan.Major shareholders pledged 537.572 billion shares.However,since 2018,the turbulent market environment has kept the stock market sluggish,and the stock equity pledge business has frequently hit the liquidation line,even triggering the transfer of control.Although the controlling shareholder pledges its own shares for financing,which seems to be a personal behavior,a large number of scholars have found through research that the equity pledge of the controlling shareholder will have an important impact on the value of the listed company,the company’s stock price,and the dividend distribution policy.As a large number of groups in the market,small and medium shareholders,their own interests are directly related to the fluctuation of the stock price of listed companies.From the standpoint of small and medium shareholders,this paper analyzes the issue of equity pledge by controlling shareholders.Through mechanism analysis and empirical analysis,this paper studies the various motivations of controlling shareholders’ equity pledge and how their equity pledge affects the interests of small and medium shareholders.In this paper,the stock price volatility is used to measure the interests of small and medium shareholders.In the empirical analysis,the cumulative excess rate of return is chosen to reflect the stock price volatility.The empirical results of this paper show that(1)the increase in the shareholding ratio of the controlling shareholder will increase the cumulative excess return of the stock;(2)when the equity pledge does not affect the controlling shareholder’s control position,its own pledge ratio and cumulative excess return(3)When the equity pledge is likely to cause the controlling shareholder to lose control,the overall pledge ratio of the company and the cumulative excess return are negatively correlated.Finally,from the perspective of regulators,listed companies and minority shareholders themselves,this paper puts forward some suggestions to protect the interests of minority shareholders.