Optimization of Corporate Performance Measures by Factor Analysis and Entropy Weighting - Based on Controlling Shareholder Equity Pledge

A single indicator does not show the company’s performance in a timely, comprehensive, objective and fair manner. This paper intends to establish a more complete and fair comprehensive index of company performance by combining two objective analysis methods: factor analysis and entropy weighting. Meanwhile, the phenomenon of equity pledges is becoming increasingly common. This paper uses a comprehensive index and selects A-share listed companies in mainland China as the research sample to explore the relationship between equity pledges by controlling shareholders of listed companies and changes in corporate performance. The results show that compared with the enterprises without controlling shareholder’s equity pledges, the operating performance of the listed companies with controlling shareholder’s equity pledges is significantly worse in the following three years, and the performance loss degree increases with the rise of the proportion of equity pledges. The paper’s conclusion verifies the usability of the comprehensive index and has essential practical significance with the mushrooming equity pledge of controlling shareholders. It also provides a theoretical basis for enhancing the supervision and governance level of controlling shareholders and the regulatory authorities to issue relevant regulations to control the pledge of equity in the capital market.