Research On The Pledge Of Controlling Shareholders’ Equity,Gover Nance Environment And Timeliness Of Annual Report

According to the report of the 19th National Congress of the Communist Party of China,China’s economy has entered the stage of high-quality development.To build a healthy and orderly capital market ecological environment is the core way to help high-quality economic development.In this process,how to prevent and resolve market risks is of great strategic significance.With the deregulation of the institutional level,equity pledge of controlling shareholder has gradually become an important financing tool in the capital market.On one hand,the equity pledge has an important incremental significance for the alleviation of shareholders’financial difficulties and the satisfaction of financing needs;on the other hand,the equity pledge crisis caused by the collapse of stock price has gradually become one of the local risk points in the capital market,and at the same time,it increases the individual risk of controlling right transfer of controlling shareholders.Therefore,it is an important measure to optimize the ecological environment of China’s capital market to prevent the occurrence of stock price collapse,relieve the market risk caused by equity pledge,and reduce the risk of the transfer of control rights of pledge shareholders.In the view of information perspective,the stock price of listed companies is closely related to information disclosure.Some studies focus on the impact of the pledge of controlling shareholders’ equity on information disclosure,including the quality,timing,type and violation of disclosure etc.,but the impact of the pledge of controlling shareholders’ equity on the timeliness of annual reports has not been studied yet,which provides an opportunity for this study.What kind of impact will the controlling shareholders have on the timeliness of the annual report disclosure of listed companies after the equity pledge?Furthermore,what are the mechanism and economic consequences of the two?This is the question expected to be answered in this paper.In 2019,the Shanghai Stock Exchange issued the announcement of No.46 stock pledge(freezing,unfreezing and unfreezing)of listed companies,which proposed the verification effect of internal and external governance roles,including the board of directors,independent directors and financial consultants on stock pledge etc.Does the pledge of controlling shareholders’ equity have a different impact on the timeliness of annual report of listed companies under the internal role governance of different board governance,independent director governance and senior management governance?How will external governance roles such as auditors,institutional investors and small and medium-sized shareholders affect the relationship between the pledge of controlling shareholders’ equity and the timeliness of annual report?Based on this,this paper builds a research framework of " controlling shareholder equity pledge-governance environment-timeliness of annual report".Using 2009-2017 data of Chinese A-share listed companies,this paper analyzes the controlling shareholder equity pledge,governance environment and annual report timeliness Relationship.The main research contents are as follows:(1)Based on the agency theory,incomplete contract theory,credit rationing theory,efficient market theory,limited attention theory,signal theory,etc.,analyzing the impact of the pledge of controlling shareholders’ equity on the timeliness of the annual report from the theoretical level,empirically testing the correlation between the two,and analyzing the mechanism and economic consequences of the two;(2)Based on stakeholder theory,short-sighted theory and interest convergence hypothesis,analyzing the impact of different levels of internal governance on the relationship between the pledge of controlling shareholders’ equity and the timeliness of annual report,and tests the impact of the pledge of controlling shareholders’equity on the timeliness of annual report under the level of differentiated board governance,independent director governance and senior management governance;(3)Based on stakeholder theory,deep pocket theory,catering theory and equity balance theory,analyzing the impact of different levels of external governance on the pledge of controlling shareholders’ equity and the timeliness of annual report,and tests the correlation between the pledge of controlling shareholders’ equity and the timeliness of annual report under different levels of auditor governance,institutional investor governance and small and medium shareholders’ governance.The research of this paper is divided into three levels:(1)Chapter 1-3 of this paper defines the core concept,literature review,theoretical framework construction and other work,which provides theoretical support for the follow-up research;(2)Chapter 4-6 is the core chapter of this paper,which respectively discusses the impact of controlling shareholder equity pledge on the timeliness of annual report,and the role of internal governance on controlling shareholder equity pledge and annual report The impact of timeliness,the impact of external governance role on the relationship between the pledge of controlling shareholders’ equity and the timeliness of annual report;(3)Chapter 7 is the research conclusion and relevant policy recommendations.The main research conclusions obtained in this paper are:(1)In the study without introducing the role of internal and external governance:compared with listed companies without controlling shareholder equity pledges,listed companies with controlling shareholder equity pledges have worse timeliness of annual reports.With the increase in the scale and frequency of equity pledges,the timeliness of annual report disclosure has also declined.The negative impact of controlling shareholder equity pledge on the timeliness of the annual report exists only in listed companies where the type II agency conflict is more serious and the proportion of major shareholders’ shares is high.At the same time,the lag in annual reports caused by the pledge of equity by major shareholders will damage the capital market performance of listed companies,leading to a decline in the return on individual stocks;(2)When the role of internal governance is included in the research framework,compared with the listed companies with high level of board governance,independent director governance and senior management governance,the negative relationship between the pledge of controlling shareholders’ equity and the timeliness of annual report only exists in the listed companies with low level of board governance,independent director governance and senior management governance;(3)Finally,the external governance role is included in the research framework,and it is found that high-quality auditor governance,institutional investors and active small and medium-sized shareholders effectively inhibit the negative effects of controlling shareholders’equity pledge and timeliness of annual report.The theoretical contribution of this paper lies in:(1)Discussing the impact of the pledge of controlling shareholders’ equity on the timeliness of the annual report of listed companies,analyzing the mechanism and economic consequences of the two,expanding the research boundary of the pledge of equity and information disclosure;(2)Using equity pledge as an exogenous shock event,exploring the influence of the controlling shareholder as a subject on the annual report of the listed company,enriching the role of the main body affecting the disclosure of the annual report,and adding new evidence for the effectiveness of the controlling shareholder on the listed company;(3)Establishing a research framework of "Pledge of Controlling Shareholders’ Equity-Governance Environment-Timeliness of Annual Report",exploring the internal governance roles(board of directors,independent directors,and executives)and external governance roles(auditors,institutional investors,and small and medium shareholders)on the relationship between the pledge of controlling shareholders’ equity and the timeliness of annual report,and providing an important incremental contribution to the research of governance environment acting on microeconomic subjects.The practical contribution of this paper lies in:(1)Helping regulators to identify the risk characteristics of equity pledge.By verifying the negative relationship between equity pledge and the timeliness of annual report,this paper provides directional evidence for regulators to prevent the risk of equity pledge;(2)Providing incremental evidence for government departments to cultivate high-quality governance roles.The conclusion of this paper confirms that effective internal and external governance environment has a significant inhibitory effect on the self-interest behavior of large shareholders,which provides a theoretical basis for the government to allocate high-quality resources and make policy tilt to support relevant governance roles;(3)Provides corresponding evidence for listed companies to enhance the quality of information disclosure.Although controlling shareholders will manage the market value to stabilize the stock price after the stock pledge,the individual stock return rate of the listed company will still decrease once the timeliness of the annual report decreases,,which makes the market value management invalid.This conclusion is helpful for the listed company to improve the timeliness of the annual report disclosure;(4)Providing the soft investment reference information for the public investors.In this paper,the internal and external governance environment is included in the research framework,and it is found that it can inhibit the self-interest behavior of large shareholders,which provides the social investors with the soft information of high-quality listed companies in addition to the financial data,and enriches the reference basis for investors.