Executive Marriage Change And Corporate Financing Constraints

With people's marriage concept gradually open,China's divorce rate shows a rising trend year by year.Divorce may not only destroy a single family,but also affect society and economic life.Due to the particularity of their identity,the divorce of enterprise executives has been paid great attention by the news media,which makes the marriage problem of executives not only a personal matter,but also a major public event that has social influence and affects all stakeholders.In recent years,the frequent emergence of "sky-high divorce" has also caused doubts and concerns among investors.In the context of the marital change of executives,according to the derivation of upper echelons theory and so on,the development prospects of enterprises will be full of uncertainty,profit margins will decline,operating risks will increase,and endogenous financing will provide limited funds.The distrust of suppliers and consumers on enterprises has been significantly deepened,and the level of business credit that enterprises can obtain has also declined.When enterprises need to raise funds from the capital market,they may face the phenomenon of not being able to raise funds or having to pay a higher cost to raise funds,under the combined effect of internal and external pressures,enterprises are subject to strong financing constraints.Based on the above background,according to the announcement on changes in shareholders' equity holding more than 5% of shares,the prompt announcement of equity transfer or the announcement of changes in the related situation of the actual controller,41 A-share listed enterprises whose executives had divorced from 2011 to2018 are selected as an experimental group.Then,by matching enterprises without divorce in the same industry in the same period as a control sample,and use the method of Differences-in-Differences,empirical test the influence of executive marital change of listed companies on enterprise financing constraints.In the measure of financing constraints,the KZ index which is transformed into dummy variable is used to measure the possibility of enterprise financing constraints.The main conclusions of this paper are as follows:After the announcement of executive marital change news,it will significantly improve the possibility of enterprise financing constraints,that is,the capital market will react negatively to the news of the executive marital change,and exacerbate the financing difficulties of the enterprise.This conclusion is still valid after a series of robustness tests.Then,in order to explore the effect of executive marital change on enterprise financing constraints,this paper introduces three variables: technological innovation investment,information transparency and institutional investor ownership,hoping to study in groups.The study finds that the impact of executive marital change on the possibility of enterprise financing constraints is more obvious in samples with higher investment in technological innovation,lower information transparency,and lower institutional investor ownership.First,because enterprises with higher investment in technological innovation have higher levels of operational risk and information asymmetry,executive marital changes have caused investors to deepen their distrust of management and have doubts about the coherence of their policies,further amplifying operational risks.When external financing is needed,these enterprises face greater financing constraints.Secondly,after the marital change of executives,enterprises with low information transparency failed to effectively alleviate the problem of information asymmetry due to the low quality of the information disclosed;corporate governance institutions such as the board of directors and the board of supervisors also failed to play their due role in supervision and checks and balances.These make the financing cost of the enterprises high,and increase the possibility of enterprise financing constraints.Finally,because of the lack of external supervision mechanisms for enterprises with low institutional investor ownership,the degree of information asymmetry is high,and management is more likely to make decisions that are detrimental to the interests of the minority shareholders;after the executive marital change,due to lack of professional analysis of institutional investors,investors are selling stocks to avoid failure,the supervision cost of credit departments such as banks has increased,so they are unwilling to lend to enterprises or demand higher interest rates.Furthermore,this paper will explore the intrinsic mechanism of the possibility of enterprise financing constraints caused by executive marital change from two dimensions of financing source and financing cost.It is found that in terms of financing sources,executive marital change can significantly reduce the level of net business credit,external financing and the amount of enterprise financing measured by the sum of net business credit and external financing;in terms of financing cost,executive marital change will lead to a significant increase in the cost of debt capital,especially the cost of interest bearing debt capital.In addition,this paper also groups the divorced executives according to their positions,and tests the differences in the effect of different position characteristics on enterprise financing constraints.The result shows that,the influence of executive marital change on the possibility of enterprise financing constraints is more obvious in the sample with higher positions of divorced executives.Summarizing the above conclusions,this paper believes that the announcement of the executive marital change by listed companies will significantly improve the possibility of enterprise financing constraints,which has been verified from both the financing source and financing cost dimensions;and this effect is more significant in the sample of higher investment in technological innovation,lower information transparency,and lower institutional investor ownership,thereby confirming the effectiveness of internal corporate governance and external supervision mechanism.On the one hand,the research results can provide the necessary decision-making information for the management of listed companies,and raise their vigilance so that they can take timely measures after the incident;on the other hand,it also helps to enhance the understanding of investors and regulators on the marital change affairs of executives,and provide reference for regulators to issue corresponding policies to improve the efficiency of capital market operations.