Pledge Of The Largest Shareholder's Equity And The Company's Risk Taking

In recent years,the pledge of the largest shareholders' equity is prevalent in China's capital market,but at the same time,a lot of pledge related risk events happened,so does this mean that the pledge of largest shareholders' equity may increase the company's risk taking? After analyzing the complexity of largest shareholders' role in corporate governance and the connotation of equity pledge,this paper selects 10317 samples from 2237 listed companies for empirical study.The results show that :(1)In the full sample,there is a significant positive correlation between the largest shareholders' pledge and the company's risk taking.(2)The relationship between pledge and risk taking will be adjusted by the nature of the company's equity.In the non-state-owned enterprise group,if the largest shareholders pledge their equity,and the proportion of pledge increases,the company's risk taking will be significantly increased,while in the state-owned enterprise group,the relationship between pledge and risk taking is not significant.(3)Furthermore,the paper studies how the pledge of largest shareholders of non-state-owned enterprises affects the risk taking through the intermediary.It is found that in the path of whether there is a pledge or not affects the company's risk taking,overinvestment is an intermediary,but the embezzlement is not.In other words,the existence of pledge may aggravate the excessive investment of the company,thus increasing the company's risk taking.In the path of the pledge proportion affects the risk taking,both overinvestment and embezzlement have the mediating effect.That is to say,the increase of the pledge proportion may not only aggravate the overinvestment of the company,but also lead to the embezzlement of the company's funds,which ultimately leads to the increase of the company's risk taking.To some extent,this paper has enriched the research on the economic consequences of the pledge of largest shareholders' equity and the influencing factors of corporate risk taking.In addition,the paper explores the transmission mechanism between the pledge of largest shareholders' equity and corporate risk taking.It helps us understand the shareholder's pledge behavior,and then take proper actions.