Major shareholders' equity pledge and the “All talk and no action” strategy in digital transformation

Based on data from Chinese-listed companies, this study examines the impact of major shareholders' equity pledges on firms' "all talk and no action" strategies in digital transformation, with increased disclosure of digital transformation information but limited actions in digital transformation. It finds that equity pledges induce the "all talk and no action" strategy. Mechanism tests reveal that major shareholders with pledged equity pursue this strategy to mitigate risks of control transfer. This effect is more pronounced for companies with higher investor attention, and practical difficulties related to digital transformation, but extensive media coverage and institutional oversight (shareholding and site visits) can mitigate such an effect. Additionally, there is no significant difference in the short-term valuation levels between companies with equity pledges and those without when the level of digital transformation disclosure is similar. Thus, investors do not perceive a significant difference in digital transformation disclosures between companies with and without equity pledges. However, the strategy of "all talk and no action" diminishes long-term performance and increases stock price crash risk, especially for companies with equity pledges.