Study On The Impact Of Controlling Shareholders' Share Pledge On The Behavior And Performance Of Listed Companies

Controlling shareholders' share pledge is common in China's capital market.And by pledging shares of listed companies,controlling shareholders can quickly obtain the required funds at a lower cost.However,while providing convenient and fast financing channels for controlling shareholders,share pledge quietly buries hidden dangers.For example,in 2018,under the combined effect of various factors such as the downturn of the stock market,the risk of liquidation gradually emerged,and the risk events caused by the share pledge of shareholders broke out on a large scale,which leads many companies,especially private enterprises,to get into trouble.Compared with minority shareholders' share pledge,controlling shareholders' share pledge often has a more significant impact on the company and the market.In China,“one share dominates” is a common feature among most listed companies,and the company's decision-making usually reflects the will of the controlling shareholders.When the controlling shareholders have shares in pledged state,for the purpose of maintaining stock prices and minimizing liquidity risks,they have a strong incentive to manage and control the behavior of listed companies,which may in hence affect the company performance.So how does controlling shareholders' share pledge affects company behavior? Will it improve the company's performance or put the company in a more disadvantaged position? Many behaviors of listed companies may be affected by the share pledge of the controlling shareholders.Among them,the distribution of cash dividends is an important financial decision of the company,and innovation is the motivation to develop and expand a company.So,in the study of the impact of controlling shareholders' share pledge on company behavior,this article focuses on cash dividend distribution and corporate innovation.Specifically,this article focuses on and studies the following questions: How does the controlling shareholders' share pledge affect the listed company's cash dividend distribution and innovation,as well as its performance? Furthermore,under different pledge rate levels,different company natures,and different market environments,what is the difference between the above effects?In this article,the initial sample comprises all companies except the financial industry companies in the A-share market between 2003 and 2018.This article selects the relevant data of share pledge,finance,patents and corporate governance of those companies,constructs research samples,and studies from the three aspects of dividend distribution,innovative behavior and company performance of listed companies.This article proposes hypotheses through theoretical analysis and conducts regression analysis with company-annual panel data to verify the hypotheses.The empirical results show that: overall,the impacts of the listed company's controlling shareholders' share pledge on the two company behaviors that this article focuses on,and company performance are negative;however,the low ratio pledge of the controlling shareholders is a normal financing behavior,while the high ratio pledge implies great risks;considering the company natures and the market environments,there are differences in the impact of controlling shareholders' share pledge on company behavior and company performance.Specifically:First,the controlling shareholders' share pledge reduces the willingness and payment level of listed companies for cash dividend distribution.Further,the low-ratio controlling shareholders' share pledge has no significant impact on the company's cash dividend payment,and when the pledge rate reaches a certain level,the company's cash dividend level will be significantly reduced.Keeping other conditions the same,the negative impact of share pledge on the cash dividend distribution of listed companies is even more significant among non-state-owned enterprises.Before and after the 2015 stock disaster,there was no significant difference in the impact of share pledges on cash dividend distribution.Second,the controlling shareholders' share pledge will hinder company innovation.Compared with state-owned enterprises,the pledge of non-stateowned enterprises' controlling shareholders has a greater impediment to the company's innovation.Compared with non-high-tech companies,the pledge of high-tech companies' controlling shareholders has a greater impediment to the company's innovation.Third,the controlling shareholders' share pledge will damage company performance.This effect is significant in both state-owned and non-state-owned enterprises.For companies with a high percentage of pledges by controlling shareholders,the negative impact is even more pronounced.Perhaps due to the changes in investors' interpretation of share pledge and the intensity of supervision,the negative impact of controlling shareholders' share pledge on the company performance varied before and after the 2015 stock market crash.The research conclusion of this paper is helpful to deepen the understanding of investors and relevant regulatory departments on the risk of high pledge ratio of controlling shareholders.By subdividing scenarios,the conclusion of this paper can also give some enlightenment to relevant regulators according to specific situations.