Research On The Impact Of Controlling Shareholders’ Share Pledge On Corporate Bond Default Risk

Share pledge financing is favored by the listed companies’ controlling shareholders because of its advantages of convenient financing without transferring control right,and it has become an important financing method of listed companies in our country.Collateral financing guarantees the controlling shareholder control only if the company’s stock does not fall in value;when the stock falls in value,the pledgee will demand more collateral to cover the fall in the share price.Therefore,the controlling shareholders must find a way to maintain the stock price in order to prevent the risk of control transfer caused by the stock price decline after the pledge.Based on Information asymmetry theory,share prices are closely related to the disclosure of information by listed companies,controlling shareholders have motive and ability to manipulate information disclosure in order to maintain stock price,which makes information asymmetry intensify,the problem of information asymmetry may lead to the occurrence of moral hazard,which makes the probability of default increase.Based on the principal-agent theory,the potential control rights transfer risk increases the degree of separation between control rights and cash flow rights,which leads to agency problems,controlling shareholders may use their controlling status to usurp the interests of the company and cover up their own infringements.However,the creditors have no actual control over the company,and the behavior of the controlling shareholder may cause the enterprise to fall into the mire of financial difficulties,which cause the probability of default of the enterprise increases.This paper studies the impact of share pledge on corporate bond default risk,and explores the mechanism of risk transmission from stock market to bond market,it is of great significance to guard against the risk of share pledge and to maintain the stability of our bond market.In this paper,we take A-share listed companies in China from 2014 to 2020 as the research sample,and use the data of default probability calculated by the simplified prediction model of default probability as the substitute variable of enterprise default risk,on this basis,the relationship between the ratio of pledge of stock rights and the corporate default risk is analyzed by using the multiple linear regression model,this paper probes into the influence of stock pledge on our country’s corporate default risk and its influence mechanism.The main regression analysis shows that controlling shareholders’ share pledges is significantly and positively related to the default risk of enterprises,indicating that an increase in the ratio of controlling shareholders’ share pledges significantly increases the default risk of enterprises.In order to ensure the reliability of the main results,this paper carries out the robustness test,which includes changing the measurement of the explained variable,replacing the regression model,using PSM to solve the sample selection bias problem,and using 2SLS to exclude the endogenous problems.In the heterogeneity analysis,group regressions are conducted based on the growth potential and short-term debt service pressure of enterprises to compare the impact of share pledges on the default risk of enterprises with different characteristics,the results show that compared with the enterprises with growth potential and those with less short-term debt paying pressure,when the growth of enterprises is poor and the short-term debt paying pressure is high,the share pledge of controlling shareholders has a more significant impact on the risk of corporate default.In the moderating effect analysis,from the internal factors of listed companies,the paper makes group comparison according to the size of manipulative accrual earnings,two-function-in-one dummy variable and the size of board of directors,re-examine the impact of the controlling shareholders’ share pledge on the risk of corporate default.The results show that the impact of share pledge on the risk of default is more significant when the level of discretionary accruals is high,and the size of the board of directors is small or the two positions are not combined,which means that effective corporate governance mechanism can mitigate the impact of equity pledge on corporate default risk.From the perspective of external factors of listed companies,group comparisons were made according to the share price synchronization and the quality of auditors to test the moderating role of external market information environment in the influence of equity pledges on corporate default risk.The results of the study indicate that the influence of equity pledges on default risk is more significant when share price synchronization is high;at the same time,the impact of equity pledges on default risk is more significant when the auditor is one of the "Big Four" or the auditor is from abroad,indicating that the quality of the auditor can mitigate the positive relationship between equity pledges and default risk.In the intermediary effect analysis,three-step method is used to test whether financing constraint and tunneling of large shareholders as intermediary variables affect the relationship between equity pledge and default risk.The results of the mediating effect test on financing constraints show that equity pledges lead to a deeper degree of financing constraints,which in turn causes an increase in the probability of corporate bond defaults.The results of the mediating effect test on major shareholder’s shelling out show that the controlling shareholder’s equity pledge leads to the increase of major shareholder’s shelling out,and then cause the increase of default probability.This paper confirms that the risk of equity pledges can be transmitted to the bond market,providing a new perspective for the study of the economic consequences of equity pledges.For bond default risk,existing studies focus more on influencing factors such as accounting information quality and macroeconomics,and less on finding the causes from controlling shareholders’ behavior;this paper provides a complete analysis of the impact of controlling shareholders’ equity pledges on bond default risk from the perspective of external market information environment and corporate governance mechanism.In addition,the exploration from the path of equity pledges affecting default risk-financing constraints and major shareholders’ shelling out-is conducive to enriching the research results on the factors influencing bond defaults.