Research On The Influence Of Controlling Shareholder Pledge On The Investment Efficiency Of Listed Companies

Since 2010,the equity pledge business in China's stock market has experienced explosive growth.In particular,the vigorous development of the capital market in 2015 made the market value of new stock pledges in the year quickly exceed 4 trillion yuan.According to the data of China Securities Depository and Clearing Co.,Ltd.,as of October 2018,3,485 of the 3,554 companies listed on the Shanghai and Shenzhen Stock Exchanges involved equity pledge business.With the slowdown in economic growth and the fall in the company's share price,news of the equity pledge business facing the risk of liquidation has frequently spread.On March 12,2018,the Shanghai Stock Exchange issued the “Measures for Stock Pledged Repo Transactions and Registration and Settlement Business Measures”,which imposed stricter regulation on the proportion of pledged equity pledges.Under this background,the equity pledge behavior of listed companies' major shareholders and their economic consequences have caused extensive discussions in the practice and academic circles.The existing literature on equity pledge has extensively discussed the motives of large shareholders' equity pledges and their impact on listed companies' performance,earnings management,and innovation.However,there are still few studies on the controlling company's equity pledge on the listed company's investment behavior and its inhibition.In a highly competitive market environment,effective capital allocation is an important guarantee for the long-term development of listed companies.Therefore,this paper cuts in from the investment behavior of listed companies and systematically studies the economic consequences of controlling shareholders' equity pledge.Specifically,this paper intends to analyze the following three aspects.First,the impact of controlling shareholder pledge on the overall investment efficiency of listed companies is studied.Secondly,paying attention to the non-efficiency investment of listed company's equity pledge behavior on listed companies is mainly reflected in insufficient investment or excessive investment.Finally,the paper further tests the possible non-linear relationship between equity pledge and corporate investment efficiency,as well as the marketization process,the inhibitory effect of institutional investors' holdings,and the mechanism of equity pledge affecting the company's non-efficiency investment.This paper takes the data of 2007-2016 of Shanghai and Shenzhen A-share non-financial listed companies as a research sample to conduct in-depth research on the above contents.The test finds that the controlling shareholder's equity pledge behavior will significantly reduce the investment efficiency of listed companies,and as the pledge ratio increases,the inefficient investment of listed companies becomes more serious.In order to clarify how the controlling shareholder's equity pledge reduces investment efficiency,we divide the inefficient investment behavior of listed companies into underinvestment and over-investment.In the further inspection section,the controlling shareholder's equity pledge mainly exacerbated the excessive investment of listed companies and had no significant impact on the investment deficit.The paper also finds that the increase of the proportion of controlling shareholders' equity pledge and the over-investment behavior of listed companies have an inverted "U"-shaped nonlinear relationship.Moreover,only in the group with fast marketization and low proportion of institutional investors,there is a non-linear relationship between the controlling shareholder pledge and the investment efficiency of listed companies,indicating that the marketization process is slow and the external institutional investors hold a high proportion of shares.The listed company has a certain restraining effect on the non-linear relationship between the controlling shareholder's equity pledge and excessive investment behavior.At the same time,we finds that the controlling shareholder's equity pledge affects the investment efficiency of the enterprise by affecting the two types of principal-agent problems.The paper's conclusions have strong theoretical and practical significance.On the theoretical level,the research in this paper not only deepens and expands the research on the economic consequences of controlling shareholders' equity pledge,but also provides a new explanation for the influencing factors of listed companies' non-efficiency investment from the perspective of controlling shareholders' equity pledge.The above findings also provide new empirical evidence for the ethical dilemma of contingency theory and the behavior choice theory of major shareholders.At the practical level,the research in this paper helps to provide a theoretical reference for behaviors such as pledgee and external investors to make more effective investment decisions.