Controlling Shareholders' Pledge Pressure and Financial Asset Investment: An Empirical Analysis based on Pledge Price

Unlike existing literature that primarily examines the quantity of share pledges, this study delves into the impact of controlling shareholders' share pledge pressure on firms' financial asset investment. Using manually collected pledge price data and focusing on Chinese listed firms from...

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Published inEmerging markets finance & trade Vol. 60; no. 15; pp. 3638 - 3660
Main Authors Niu, Yuhao, Lu, Chuang, Zhang, Wenting, Li, Xinwu
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 07.12.2024
Taylor & Francis Ltd
Subjects
controlling shareholder
financial assets
pledge pressure
pledge price
Share pledge
Stockholders
Online AccessGet full text
ISSN1540-496X
1558-0938
DOI10.1080/1540496X.2024.2356883

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Abstract Unlike existing literature that primarily examines the quantity of share pledges, this study delves into the impact of controlling shareholders' share pledge pressure on firms' financial asset investment. Using manually collected pledge price data and focusing on Chinese listed firms from 2007 to 2018, we observe a positive correlation: the higher the controlling shareholders' share pledge pressure is, the higher the firm's financial investment will be. Our findings withstand various robustness tests. Channel tests reveal that share pledge pressure expedites financial asset investment by increasing operational and cash flow risks. Moreover, the impact of share pledge pressure on a firm's financial investment becomes more pronounced when the pledgee is a securities or asset management company, the pledge duration is longer, the controlling shareholder's pledge ratio is higher, or the firm faces a challenging business environment. This study offers valuable insights for accurately and directly measuring controlling shareholders' share pledge pressure and underscores the pivotal role of share pledging in firm investment decisions.
AbstractList Unlike existing literature that primarily examines the quantity of share pledges, this study delves into the impact of controlling shareholders' share pledge pressure on firms' financial asset investment. Using manually collected pledge price data and focusing on Chinese listed firms from 2007 to 2018, we observe a positive correlation: the higher the controlling shareholders' share pledge pressure is, the higher the firm's financial investment will be. Our findings withstand various robustness tests. Channel tests reveal that share pledge pressure expedites financial asset investment by increasing operational and cash flow risks. Moreover, the impact of share pledge pressure on a firm's financial investment becomes more pronounced when the pledgee is a securities or asset management company, the pledge duration is longer, the controlling shareholder's pledge ratio is higher, or the firm faces a challenging business environment. This study offers valuable insights for accurately and directly measuring controlling shareholders' share pledge pressure and underscores the pivotal role of share pledging in firm investment decisions.
Author Niu, Yuhao
Li, Xinwu
Lu, Chuang
Zhang, Wenting
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Unlike existing literature that primarily examines the quantity of share pledges, this study delves into the impact of controlling shareholders’ share pledge...
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SubjectTerms controlling shareholder
financial assets
pledge pressure
pledge price
Share pledge
Stockholders
Title Controlling Shareholders' Pledge Pressure and Financial Asset Investment: An Empirical Analysis based on Pledge Price
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