A Study On The Motivation And Economic Consequences Of Controlling Shareholder's Share Pledge

In recent years,as one of the new financing methods,the pledge of stock has developed rapidly.There are many news reports that the pledges of the controlling shareholders are forced to liquidate.The risks caused by them are strongly concerned by all parties in the capital market.However,the academic research on the share pledge of controlling shareholders remains to be further.Based on the background of China capital market,the issue of the share pledge of controlling shareholder is mainly based on the theory of agency and control,which is not only of great academic value but also of great practical guiding significance.Based on the background of China's system,this research focuses on the current situation and problems,motivation and economic consequences of controlling shareholder's share pledge,the policy choice of controlling shareholder's share pledge to listed companies and the capital of the company market performance in an in-depth and systematic study,trying to reveal the various motives and complicated economic consequences possessed by the controlling shareholders in China listed companies from a more comprehensive and novel perspective.It not only theoretically expands and enriches the research in relevant fields,but also provides an important reference value for further improving the regulatory system of share pledge,protecting the interests of investors and avoiding systematic financial risks.Based on the review of domestic and foreign literatures,combined with the dynamic changes of the institutional environment in China's capital market,this paper combs the changing trend and characteristics of controlling shareholder's share pledge,and chooses the main research questions of this paper.Specifically speaking,this paper mainly studies three issues.First of all,it investigates whether the controlling shareholder's share pledge has other motives besides easing its financing constraints.Secondly,based on the R&D perspective,it examines the mechanism of the share pledge of controlling shareholders to reduce the risk of transfer of control rights.Thirdly,based on the M&A perspective,it examines the mechanism of the share pledge of controlling shareholders to reduce the risk of transfer of control rights.In summary,the main conclusions of this paper are as follows:First,participating in the subscription of private placement of new shares is positively related to the controlling shareholder's share pledge,which proves that the controlling shareholder's share pledge has the motivation other than to ease its own financing constraints.The shareholding ratio of the controlling shareholder can weaken the positive correlation between the controlling shareholder's participation in the subscription of the private placement and the controlling shareholder's share pledge,which proves that controlling shareholder's share pledge has the motivation of consolidating control.The controlling shareholder's subscription of private placement through share pledge is significantly positively correlated with long-term market performance,indicating that the controlling shareholder's share pledge also has a motivation that controlling shareholder is optimistic about the future development prospects.Second,the controlling shareholder's share pledge will restrain the firm's innovation investment.Although overall,the pledge of controlling shareholder share and corporate R&D investment significantly negatively correlated.However,further studies have found that only when the controlling shareholder has a high pledge ratio,the controlling shareholder can only to cut R&D investment.Among the companies with lower proportion of controlling shareholders holding shares and those pledged continuously,the issue of controlling shareholders' R&D investment due to share pledge will be even more significant.The closer the stock goes to the share pledge liquidation line,the stronger the motivation for controlling shareholders to reduce R&D investment.Third,the controlling shareholder's share pledge is significantly positively correlated with the company's M&A choice.Further research shows that the higher the risk of controlling shareholder' share pledge,the stronger the positive correlation between the controlling shareholder's share pledge and the company's M&A choice;the controlling shareholder's equity share has no significant impact on the short-term M&A performance,but there is significant performance on long-term M&A performance.The contribution and innovation of this article are mainly reflected in the following aspects:First,the research of the motivation of the controlling shareholder's share pledge is one of the few empirical studies on controlling shareholder's share pledge.It expands the existing research on the share pledge field and makes the share pledge research more systematic and complete.The research on the controlling shareholders'motivation of equity pledge not only profoundly reveals the underlying reasons behind the controlling shareholder's share pledge,but also helps the future research to better understand the possible economic consequences of the share pledge.Second,this paper provides two new research perspectives and empirical evidence for the study of the economic consequences of share pledge.In the existing research,it has been pointed out that there is motivation to maintain the stock price after the share pledge of the controlling shareholder,but there are few empirical evidences on what channel to play through it.Based on two novel perspectives,namely,the company's innovation investment and the M&A,which reveals the micro mechanism of the controlling company's shareholding pledge affecting listed companies.Third,this article enriches the research on private placement,enterprise innovation and M&A related fields.Although many scholars have done a lot of research on the above fields,few studies have examined the relationship between the controlling shareholders' share pledge and the above three branches.The research in this paper is a useful supplement to related fields.Finally,on the practical level,the findings of this paper can provide important reference value for further improving the formulation of share pledge policy and protecting the interests of investors.