Corporate digital transformation and major shareholder equity pledges: An analysis of incentive and constraint effects

Abstract

This paper tests how corporate digital transformation improves the equity pledging behavior of major shareholders. The empirical results show that enterprise digital transformation can reduce the number of equity pledges and the proportion of equity pledges, that is, enterprise digital transformation exerts a constraining effect on the equity pledging behavior of major shareholders and suppresses speculative pledging behavior. In addition, in terms of the use of pledged funds, major shareholders of enterprises with high levels of enterprise digital transformation are more willing to use pledged funds to support enterprise development and promote enterprise innovation, that is, enterprise digital transformation exerts an incentive effect. Mechanism analysis reveals that the digital transformation of enterprises can play a role in enhancing the transparency of enterprise information, small and medium-sized shareholders' “voting with their feet” and the efficiency of enterprise innovation, and positively affect the behavior of major shareholders. Heterogeneity analysis indicates that digital transformation is more effective in companies with low equity balance, high audit quality, and high technological content. Compared with state-owned enterprises, digital transformation is also more effective in private enterprises. Moreover, external media attention and executive shareholding play a positive role in strengthening the improvement of digital transformation on equity pledge behavior. The research conclusions provide valuable insights for strengthening capital market governance.