Equity Pledge Of Controlling Shareholders,Internal Control And Capital Investment Efficiency

Compared with other financing methods,there are a number of advantages to equity pledge.On the one hand,It can quickly obtain financing funds while retaining the controlling shareholder’s control of listed companies.On the other hand,It’s easily accepted by financial institutions.Therefore,the equity pledge is increasingly favored by our country’ s capital market,There has even been a phenomenon of "all-share pledge".For all the faults the equity pledge has displayed in recent years,their impact on the daily production and operation decisions of listed companies and market reactions has attracted the attention of the practice field and academic field.The current academic research on equity pledge mainly focuses on motivation and economic consequences,but there is a lack of research on its relationship with capital investment efficiency.As the core of the company’s major financial decisions,investment decisions play a vital role in the company’ s rapid development.Controlling shareholders affect the company’ s investment decisions to a large extent,and further affect the company’ s capital investment efficiency.This means that if the controlling shareholder pledge his equity,it may affect the efficiency of the company ’s capital investment.Internal control also has a direct impact on company’ s investment decisions,so it is likely to play a role in governance to a certain extent.Based on financing constraint theory,principal-agent theory and information asymmetry theory,the first step of this paper is to discuss the correlation between equity pledge and efficiency of capital investment first.On this basis,internal control is introduced to analyze the effect of internal control on the relationship between controlling shareholders’ equity pledge and capital investment efficiency.What’s more,further studies are needed to identify the influence of different property rights in internal control on the relationship between the two,and identify the influence of different use of equity pledge funds in internal control on the relationship between the two.Through the empirical research on the data of A-share listed companies from 2009 to 2018,this paper finds that the equity pledge of controlling shareholders reduces the efficiency of capital investment,and internal control can suppress this negative correlation.Through further research,this role is more obvious in non-state-owned enterprises.In addition,this paper also finds that compared to investing equity pledge funds in the pledged company,controlling shareholders are more willing to invest equity pledge funds in their own companies and the third part.When only investing in the controlling shareholders’ own companies and a third party,it has a negative effect on the efficiency of capital investment,and internal control can play a moderating effect on this negative impact.This paper is expected to enrich the research on the economic consequences of equity pledge and the efficiency of capital investment field.Apart from that,It can provide theoretical basis for standardizing the equity pledge behavior of controlling shareholders and improving the internal control system of enterprises.However,due to my limitations on experience,ability and time,this article still has some shortcomings.Future research can be further improved in the following points:(1)taking the dynamic changes of the controlling shareholder’s equity pledge into account,such as the release of pledge,transfer of shares,allotment of shares,extensions,additional pledges etc.;(2)conducting further research on the basis of sufficient data on " investing equity pledge funds only in the pledged company ",or finding more appropriate indicators to measure the result of different investment directions of equity pledge funds;(3)taking macro factors as part of the control variables for research.