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Relationship Between Controlling Shareholders’ Participation in Share Pledging and Accounting Conservatism in China

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  • Jingjing Xu

Abstract

This study examines the relationship between controlling shareholders’ participation in share pledging and accounting conservatism in the Chinese stock market. Share pledging introduces risks to controlling shareholders and leads to severe information asymmetry between controlling shareholders and outside minority shareholders. This, in turn, results in competing incentives with regard to financial reporting. We find that controlling shareholders’ participation in share pledging negatively affects accounting conservatism, especially for firms located in regions with weak legal enforcement and poor investor protection. Our study shows that controlling shareholders’ share‐pledging behaviour negatively influences firms’ reporting quality, especially in areas with weak legal systems.

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  • Jingjing Xu, 2021. "Relationship Between Controlling Shareholders’ Participation in Share Pledging and Accounting Conservatism in China," Australian Accounting Review, CPA Australia, vol. 31(1), pages 9-21, March.
    • Handle: RePEc:bla:ausact:v:31:y:2021:i:1:p:9-21
    DOI: 10.1111/auar.12282
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    3. Zhou, Jingting & Li, Wanli & Yan, Ziqiao & Lyu, Huaili, 2021. "Controlling shareholder share pledging and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    4. Maoli Ji & Yuguang Ji & Shulan Dong, 2022. "Environmental Accounting Information Disclosure Driving Factors: The Case of Listed Firms in China," Sustainability, MDPI, vol. 14(23), pages 1-23, November.
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    7. Li, Ziyang & Han, Ning & Zeng, Qing & Li, Yu, 2022. "Executive team heterogeneity, equity pledges, and stock Price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 84(C).
    8. Cui, Xin & Ma, Tingting & Xie, Xiaochen & Goodell, John W., 2023. "Uncertainty of uncertainty and accounting conservatism," Finance Research Letters, Elsevier, vol. 52(C).
    9. Michael Bradbury & Bryan Howieson, 2021. "Editorial: Virtual Issue and Call for Special Issue on IFRS 9 Financial Instruments," Australian Accounting Review, CPA Australia, vol. 31(1), pages 3-4, March.
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