Research on the impact of equity pledge loans on financial distress and forecasting ability--Based on the "Factor-Logit" model

Yiran Zhou

doi:10.54097/xz0tx478

Authors

Yiran Zhou

DOI:

https://doi.org/10.54097/xz0tx478

Keywords:

equity-pledged loans, financial distress, predictive capacity,

Abstract

China has taken many steps in recent years to improve capital market oversight to guarantee the market's steady and sound growth. One of the most important strategies is to apply ST and *ST warnings to listed corporations that are operating in an unhealthy manner. At the same time, stock pledges are typically preferred by listed company shareholders as a convenient and effective financing option. This study selects financial and corporate governance variables, builds "factor-logit" analysis models to compare the prediction ability, and focuses on pertinent data of equity pledges involving the controlling shareholders of A-share listed companies in Shanghai and Shenzhen from 2003 to 2023. The findings indicate a negative relationship between the controlling shareholder's equity pledge actions and the likelihood of financial difficulties during the next three years. At the same time, the addition of equity pledge data has in fact increased the prediction's accuracy of financial hardship. This finding can give external lenders more precise investment information and has practical consequences for reducing financial crises.

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