Controlling Shareholder's Stock Pledge And Accounting Conservatism

In recent years,as a new type of debt financing,stock pledge has become a “weapon” for the financing of many controlling shareholders.According to the Wind statistics,in 2016,1595 companies in China occurred stock pledge,the total market value of pledged shares was up to 5 trillion yuan and even some companies just to sign again for the pledge.However,although the stock pledge is now being held up by the market,the risks behind it are more worthy of our attention.When the share price falls to the “precautionary line” or even “the flat line”,Controlling shareholders will face the risk of additional guarantee and even the transfer of control.Therefore,the controlling shareholder is likely to take a series of measures to stabilize the share price and reduce the risk of control transfer after the stock pledge.In the background of the increasingly frequent trading activities of stock pledge,we need to deeply think and explore the economic consequences of controlling shareholders' stock pledge.Previous studies have shown that controlling shareholders may through accrual earnings management(Huang Zhizhong et al.,2014),real earnings management(Wang Bin et al.,2015;Xie Deren and Liao Ke,2016),tax avoidance(Wang Xiongyuan et al,2018)and other way to improve the share price and reduce the risk of control transfer,but there is no one having yet studied from the important measurable indicator of accounting information quality--accounting conservatism.Controlling shareholders after the stock pledge are likely to tend to delay disclosure of bad news to stabilize the current price level.Therefore,this paper mainly studies the influence of stock pledge of controlling shareholders on accounting conservatism of listed companies.Based on the incomplete contract theory,principal-agent theory,asymmetric information theory as the theoretical support,we take 2007-2016 Shenzhen and Shanghai a-share listed companies as the research object,throughing multiple regression analysis and robustness test to research the influence of the controlling shareholder's stock pledge on the accounting conservatism.At the same time,we take into account the situation of the stock pledge of other major shareholders in order to comprehensively understand the negative impact of the stock pledge of the controlling shareholders.Moreover,based on the reality background of enterprises with different property rights in China's capital market and the marketization level of each region has big difference,we further study whether there are differences in the influence of controlling shareholder stock pledge on accounting conservatism level under different property rights and marketization.Through the research,we found that:(1)the controlling shareholder's stock pledge is negatively correlated with the accounting conservatism;(2)when other major shareholders also take stock pledge,the controlling shareholder's stock pledge has stronger negative correlation with the accounting conservatism.(3)Compared with the state-owned enterprises,the negative correlation between the controlling shareholder's stock pledge and the accounting conservatism is stronger in non-state-owned enterprises.(4)Compared with the regions with lower marketization level,the negative correlation between controlling shareholder's stock pledge and accounting conservatism is stronger in the regions with higher marketization level.In this paper,the overall research not only expands the literature about the influential factors of accounting conservatism.but also provides policy implications to better standardize the stock pledge system and promote the sustainable and healthy development of capital market.