Equity Pledge Research Articles

Impact of equity pledges on analysts earnings forecasts

This study conducts an in-depth analysis of the relationship between the equity pledge phenomenon and analysts’ earnings forecast behavior using China's A-share listed companies from 2017 to 2022 as the research sample. Findings indicate that the existence of equity pledges increases the error range, optimism, and disagreement among analysts when making earnings forecasts. However, for non-state-owned enterprises, companies with a relatively high proportion of institutional shareholders, and those with better transparency, the impact of equity pledges on analysts’ forecasting behavior shows a weakening trend.

Insurance participation, equity pledge and stock price crash risk: Evidence from China.

This paper analyzes the causes of equity pledge, external conduction mechanisms, and economic consequences from the perspective of insurance participation by integrating insurance participation, equity pledge, and stock price crash risk into a unified framework. An empirical analysis of sample data from listed companies in Shanghai and Shenzhen between 2007-2021, indicates that equity pledge reduces the risk of collapse as companies hedge the risk induced by the equity pledge. Further research has revealed that insurance participation can mitigate stock price crash risk brought by equity pledge through a regulatory effect, which is more pronounced for private companies and those with a high shareholding ratio, and companies in manufacturing industry. This is because private companies have a higher demand for capital as their property rights are not state-owned, the degree of separation of powers and agency conflicts is greater in companies held by large shareholders, manufacturing companies usually have stable earnings and cash flow performance, and the financial support provided by insurers for equity pledges at risk can effectively reduce the risk of their collapse.

A Study of Controlling Shareholders’ Equity Pledge Rate Based on Dividend Policy and Barrier Option

A Study of Controlling Shareholders’ Equity Pledge Rate Based on Dividend Policy and Barrier Option

Do controlling shareholders' equity pledges exacerbate the stock price crash risk? -A study based on margin trading and securities lending transactions in China's securities market

It clarifies the influence mechanism of controlling shareholders' equity pledges, margin trading and securities lending, and stock price crash risk from the perspective of corporate governance, etc. This paper establishes a main and interaction effect regression model to empirically test the impact mechanism of controlling shareholders' equity pledge on stock price crash risk and the moderating effect of margin trading and securities lending in the process of this impact based on the measures of stock price crash risk, controlling shareholders' equity pledge level, as well as margin trading and securities lending transaction size, using China's A-share listed companies from 2010 to 2020 as the sample. It finds that: (i) The higher the controlling shareholder's equity pledge ratio of listed companies, the lower the stock price crash risk. (ii) There is no significant effect of margin trading and securities lending transactions on stock price crash risk. (iii) Securities lending transactions have a positive moderating effect in the impact of controlling shareholders' equity pledges on stock price crash risk, but the moderating effect of margin trading transactions is insignificant.

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

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.

Research on the Impact of Equity Pledge on Company Value

This article aims to provide a literature review on the impact of equity pledges on corporate value, and to explore in depth the application of equity pledges as a financial tool in corporate governance and capital operation, as well as its multidimensional impact on corporate value. By reviewing and analyzing relevant literature both domestically and internationally, this article first defines the basic concept of equity pledges and then elaborates on the impact mechanism of equity pledges on company value from both positive and negative perspectives. In terms of positive impact, this article explores how equity pledges can promote corporate financing, optimize capital structure, and enhance the control of major shareholders over the company. In terms of negative impacts, the possible control risk, market risk, and potential damage to the interests of small and medium-sized shareholders brought about by equity pledges were analyzed. Furthermore, this article also discusses the differences in the impact of equity pledges on company value in different scenarios and proposes corresponding policy recommendations and research prospects.

Controlling shareholders' equity pledge, litigation risk and corporate ESG performance

Based on the sample data of Chinese listed companies, this paper investigates the relationship between controlling shareholders' equity pledges, litigation risk and corporate ESG performance and draws the following empirical conclusions: controlling shareholders' equity pledge increases corporate litigation risk; controlling shareholders' equity pledge negatively affects corporate EGS performance; litigation risk negatively affects EGS performance; and corporate litigation risk plays a positive moderating role in the relationship between controlling shareholders' equity pledge and ESG performance.

The role of product market competition and analyst attention in modulating the link between equity pledges and classification shifting

This study investigates the association between equity pledges and classification shifting earnings management in Chinese listed firms, spanning the period from 2016 to 2022. Additionally, it explores the moderating influence of product market competition (PMC) and analyst attention on this relationship. By analyzing a sample comprising 12,583 firm-year observations, several notable findings are observed. The regression results reveal a positive and statistically significant relationship between equity pledges and classification shifting earnings management (coefficient = 0.00234, p < 0.01). Moreover, this positive impact is further magnified when specifically considering downward classification shifting (coefficient = 0.00368, p < 0.01). Regarding the moderating factors, the results demonstrate a positive moderating effect of PMC on the relationship between equity pledges and classification shifting, with an interaction coefficient of 0.0165 (p < 0.01). This moderating effect is particularly pronounced in the context of downward classification shifting, with an interaction coefficient of 0.0142 (p < 0.01). Similarly, analyst attention also positively moderates the relationship, as indicated by an interaction coefficient of 0.00144 (p < 0.05), with a stronger effect observed in the case of downward classification shifting, with an interaction coefficient of 0.00329 (p < 0.01). Furthermore, additional tests reveal that leverage strengthens the aforementioned moderating effects. The three-way interaction involving debt, PMC, and equity pledges significantly influences classification shifting, with a coefficient of 0.0415 (p < 0.05). Specifically, debt exacerbates the moderating impact of competition on highly leveraged firms that engage in downward classification shifting, as evidenced by a coefficient of 0.0599 (p < 0.05). Similarly, debt reinforces the moderating role of analyst attention (coefficient = 0.00820, p < 0.05), especially for downward classification shifting (coefficient = 0.00902, p < 0.1). Propensity score matching and robustness tests validate the findings. Therefore, this research contributes to the understanding of the economic implications of equity pledge by focusing on earnings manipulation through classification shifting. It also examines this relationship within different competitive environments and external regulatory frameworks, aiming to promote the long-term viability of companies.

Major shareholder equity pledge and litigation risk

This study analyzes the impact of significant shareholder equity pledges on litigation risk, and the results show that significant shareholder equity pledges contribute to the elevation of corporates' litigation risk and that increased information transparency can reduce litigation risk when a major shareholder's equity is pledged. This study conducted robustness and endogeneity analyses, which also support the conclusion.

Tunneling motivation or legitimacy motivation? The impact of digital transformation on controlling shareholders' share pledging

With the profound integration of technology and finance, the governance impact of digital transformation has emerged as a prominent discussion in the realm of corporate governance. This study seeks to investigate whether corporate digital transformation, supported by digital governance models, influences controlling shareholders’ share pledging. Leveraging data from A-share listed companies spanning 2010 to 2021, we explore the effects of corporate digital transformation on controlling shareholders' share pledging from the perspectives of tunneling and legitimacy motivations. The findings reveal that corporate digital transformation acts as a deterrent to controlling shareholders' share pledging. Particularly, in cases where companies lack vertical integration in top management, encounter significant financing constraints, or operate in regions with lower levels of rule of law, the suppressive impact of digital transformation on controlling shareholders' share pledging is more pronounced. At a micro level, corporate digital transformation diminishes the tunneling motivation of controlling shareholders and curbs their equity pledge actions through mechanisms such as executive failure tolerance and external supervision. Furthermore, driven by legitimacy motives, it restrains controlling shareholders’ share pledging by enhancing short-term financing capabilities through the avenue of digital transformation. This study contributes to a deeper comprehension of how corporate digitalization bolsters corporate governance, offering novel governance insights to advance the high-quality evolution of the capital market.

Digital transformation, equity pledge and labor income share

This paper examines the impact of digital transformation on firms' labour income share using data from China's A-share listed companies from 2012 to 2022. The findings show that digital transformation generally increases firms' labour income share, mainly due to the increase in the share of graduate students and R&D personnel. However, equity pledges may undermine this positive impact.

Equity pledge of controlling shareholders and investment structure

Equity pledge of controlling shareholders and investment structure

Major shareholder equity pledges and the risk of stock price crash based on external audit quality

This study selects China's listed A-share firms from 2006 to 2022 as the research object to investigate the relationship between an equity pledge by a major shareholder and the risk of the company's stock price collapse. A significant negative correlation is found between equity pledges by major shareholders and the risk of share price collapse; equity pledges affect the risk of share price collapse through the firm's R&D investment.

Can local fintech development improve analysts’ earnings forecast accuracy? Evidence from China

This paper examines the impact of local fintech development on the accuracy of analysts’ earnings forecasts. We employ the method of web text mining to construct the local fintech development index for empirical test. Our findings indicate that local fintech development has a substantial positive impact on analysts’ earnings forecast accuracy by promoting firm digital transformation and alleviating the information asymmetry between firms and outsiders. Additionally, this effect is particularly pronounced for analysts without equity pledge affiliation and those with weaker buy-side pressure. This study shows that local fintech development can enhance the information environment of the capital market.

The Sustainability of Corporate ESG Performance: An Empirical Study

A company’s ESG (environmental, social, and government) performance is an indicator of its sustainable development. In practice, enterprises should focus on improving their governance structure and improving their governance level to achieve sustainable development and long-term value. Based on a sample of China’s A-share-listed companies from 2014 to 2022, this paper obtains data from the WIND and CSMAR databases and finally selects 14,757 observed values. With ESG performance as the explained variable and Pledge as the explanatory variable, the relationship between major shareholders’ equity pledges and ESG performance is explored using a regression analysis. The results show that the correlation coefficient, β1, between corporate ESG performance and the pledge ratio of major shareholders is −0.0167, which is significantly negative at the 1% level, indicating that the equity pledges of major shareholders will have a negative impact on corporate ESG performance, and ESG performance shows that the pressure of controlling shareholders’ equity pledges mainly reduces the performance of companies in the areas of social responsibility (S) and governance (G) and does not have a significant impact on environmental construction (E). Further research shows that under the same conditions, compared with state-owned enterprises, the equity pledge behavior of major shareholders of private enterprises has a more significant impact on corporate ESG performance. This study is a good attempt at examining the sustainability of corporate ESG performance.

Controlling shareholder's equity pledge and corporate financialization

This paper selects China's A-share listed firms from 2011 to 2022 as a research sample to investigate whether the equity pledge behavior of controlling shareholders of listed firms has an impact on the financialization of firms. The study finds that equity pledges exacerbate the financialization of firms; investor sentiment plays a mediating role in the impact of controlling shareholders' equity pledges on firms' financialization behavior; and the correlation between controlling shareholders' equity pledges and firms' financialization is more significant in firms with lower financing constraints than in firms with higher financing constraints.

Equity pledge and debt financing of listed companies

This paper selects the relevant data of listed companies from 2015 to 2021 to study the relationship and influence mechanism between equity pledge behavior and debt financing cost of listed companies. It is found that controlling shareholders' equity pledge behavior affects the debt financing cost of listed companies, which makes the financing cost of listed companies increase; equity pledge mainly affects the debt financing cost through the two paths of control transfer risk and information disclosure quality, which makes the debt financing cost increase, and the profit appropriation motive does not constitute the path of equity pledge affecting the debt financing cost.

Stake of shares, Stock liquidity and Listed company information disclosure violations

In recent years, due to the rapid development of China's domestic market economy, the financing method of equity pledge has played a very important position and influence among the main financing methods of listed companies due to its strong flexibility, simple transaction method and high efficiency. Based on the panel information of A-share non-financial listed companies in Shanghai and Shenzhen from 2016 to 2022, this paper studies the impact of equity pledge of controlling shareholders on corporate information disclosure violations, and explores whether equity pledge will affect corporate information disclosure violations by affecting stock liquidity. The results show that the equity pledge of the controlling shareholder will significantly improve the liquidity of stocks, thereby aggravating the company's information disclosure violations, and the stock liquidity will enhance the inducing effect of equity pledge on the company's information disclosure violations. Moreover, in non-state-owned enterprises, the impact of equity pledge of controlling shareholders on corporate information disclosure violations is more significant.

Controlling Shareholder Equity Pledge and Corporate ESG Responsibility Fulfillment Inhibition or Promotion

Corporate ESG responsibility fulfillment has become an important measure for enterprises to practice low-carbon development concepts at the micro level and promote corporate social responsibility fulfillment and corporate governance. During this process, the behavior of corporate shareholders has also become an important factor affecting the fulfillment of corporate ESG responsibilities. Based on the data of China's A-share listed companies from 2010 to 2022, this paper studies and analyzes the impact of the controlling shareholder's equity pledge behavior on the performance of corporate ESG responsibilities. The study found that the controlling party's equity pledge behavior inhibits the fulfillment of ESG responsibilities; optimizing the internal control environment and increasing corporate social attention can reduce the negative impact of pledge behavior on the fulfillment of ESG responsibilities to a certain extent; in the analysis of corporate heterogeneity, Equity pledge has less inhibitory effect on state-owned enterprises' performance of ESG responsibilities, and the effect on non-state-owned enterprises is more obvious. Based on this, the research puts forward three dimensions of policy suggestions to improve ownership structure, strengthen internal control and strengthen external supervision, in order to bring effective guidance for standardizing enterprise ESG performance.

The impact of equity pledge on inefficient investment: a perspective from family entrepreneurship

The impact of equity pledge on inefficient investment: a perspective from family entrepreneurship