Research on Risk Management of Equity Pledge in Listed Companies: A Case Study of Guirenniao

Abstract

In the present financial market, the financial needs of listed companies are expanding rapidly. Equity pledge, as a commonly used means of financing for listed companies, is becoming increasingly significant. As an emerging form of guarantee, equity pledge allows listed companies to pledge their own equity as collateral to obtain financing from external financial institutions. Equity pledge has many advantages, such as universality, fast financing speed, strong security, and effective risk diversification. However, equity pledge not only meets the financing needs of listed companies, but also brings corresponding risks to them. this paper selects the classic case of Guirenniao Co., Ltd. as the research object and adopts the literature analysis method to review relevant research on equity pledge both domestically and internationally. Based on the leverage cycle theory, PBC (Private Benefits of Control) theory, and asymmetric information theory, the article analyzes the risks associated with equity pledge and identifies excessive pledge by Guirenniao as an important factor contributing to the failure of company operation. Finally, based on the research findings, risk response measures are proposed from the main aspects of external information disclosure, internal supervision and control, enhancement of enterprise value, and dynamic monitoring of business operations. It aims to raise awareness among other listed companies and their stakeholders, prevent risks, effectively supervise the equity pledge behavior of listed companies, and ensure the sustainable development of equity pledge.