{"title":"The impact of share-pledging purposes on firm performance and innovation","authors":"Xiao Jia, Ellen Jin Jiang, Rui Wang","doi":"10.1111/corg.12519","DOIUrl":null,"url":null,"abstract":"<div>\n \n \n <section>\n \n <h3> Research question</h3>\n \n <p>Share pledging by controlling shareholders can be motivated by business or personal purposes. We investigate whether the firm performance and innovation outputs are different for firms with controlling shareholders pledging shares to support their firm's financing (business-pledging firms) and those pledging shares for increasing personal wealth (individual-pledging firms).</p>\n </section>\n \n <section>\n \n <h3> Research findings</h3>\n \n <p>Using data from publicly listed Chinese firms, we find that business-pledging firms are associated with higher changes in Tobin's Q and more patent outputs compared with individual-pledging firms. In additional tests, we show that the impact of share-pledging purposes on firm performance and innovative outputs is more pronounced for Chinese non-state-owned enterprises, which have relatively limited access to traditional bank loans.</p>\n </section>\n \n <section>\n \n <h3> Theoretical implications</h3>\n \n <p>In this study, we bring new empirical evidence to agency theory, especially the “principal–principal” problem. We identify two inherently different purposes in share-pledging cases—business pledging and individual pledging. We show that in business-pledging cases, pledgers' interests become more aligned with outside shareholders, and pledgers have higher incentives to enhance firm value and innovation productivity, relative to individual pledging. This paper adds to the evidence on the bright side of share pledges.</p>\n </section>\n \n <section>\n \n <h3> Practitioner implications</h3>\n \n <p>This paper sheds light on the recent policy debate regarding the costs and benefits of share pledging and has implications for regulators and investors. Thus, it may be vital for publicly listed firms to disclose the purposes of share pledging.</p>\n </section>\n </div>","PeriodicalId":48209,"journal":{"name":"Corporate Governance-An International Review","volume":null,"pages":null},"PeriodicalIF":4.6000,"publicationDate":"2023-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Corporate Governance-An International Review","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/corg.12519","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
Research question
Share pledging by controlling shareholders can be motivated by business or personal purposes. We investigate whether the firm performance and innovation outputs are different for firms with controlling shareholders pledging shares to support their firm's financing (business-pledging firms) and those pledging shares for increasing personal wealth (individual-pledging firms).
Research findings
Using data from publicly listed Chinese firms, we find that business-pledging firms are associated with higher changes in Tobin's Q and more patent outputs compared with individual-pledging firms. In additional tests, we show that the impact of share-pledging purposes on firm performance and innovative outputs is more pronounced for Chinese non-state-owned enterprises, which have relatively limited access to traditional bank loans.
Theoretical implications
In this study, we bring new empirical evidence to agency theory, especially the “principal–principal” problem. We identify two inherently different purposes in share-pledging cases—business pledging and individual pledging. We show that in business-pledging cases, pledgers' interests become more aligned with outside shareholders, and pledgers have higher incentives to enhance firm value and innovation productivity, relative to individual pledging. This paper adds to the evidence on the bright side of share pledges.
Practitioner implications
This paper sheds light on the recent policy debate regarding the costs and benefits of share pledging and has implications for regulators and investors. Thus, it may be vital for publicly listed firms to disclose the purposes of share pledging.
期刊介绍:
The mission of Corporate Governance: An International Review is to publish cutting-edge international business research on the phenomena of comparative corporate governance throughout the global economy. Our ultimate goal is a rigorous and relevant global theory of corporate governance. We define corporate governance broadly as the exercise of power over corporate entities so as to increase the value provided to the organization"s various stakeholders, as well as making those stakeholders accountable for acting responsibly with regard to the protection, generation, and distribution of wealth invested in the firm. Because of this broad conceptualization, a wide variety of academic disciplines can contribute to our understanding.