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Does equity pledge of major shareholders affect investment efficiency?

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  • Hao, Chen
  • Lixia, Wu

Abstract

Using the data of China A-share listed companies from 2008 to 2020 as samples, this paper finds that major shareholders' equity pledge reduces the investment efficiency of the company, and the proportion of major shareholders' equity pledge to the total share capital is significantly negatively correlated with the investment efficiency of the company. In addition, when the company's external financing demand is small and the degree of marketization is low, the damage of major shareholders' equity pledge to investment efficiency is more and more obvious. The above evidence shows that the pledge of major shareholders' equity is a "self-interested tool" rather than a "value creation".

Suggested Citation

  • Hao, Chen & Lixia, Wu, 2023. "Does equity pledge of major shareholders affect investment efficiency?," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s154461232300644x
    DOI: 10.1016/j.frl.2023.104272
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    References listed on IDEAS

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    Cited by:

    1. Tian, Zhongliang & Tang, Ruoyuan & Liu, Wenhe & Qi, Yuan, 2024. "Controlling shareholder's equity pledge and corporate financialization," Finance Research Letters, Elsevier, vol. 60(C).
    2. Li, Jiao, 2024. "Controlling shareholders’ stock pledges and greenwashing–Evidence from China," Finance Research Letters, Elsevier, vol. 69(PB).
    3. Ren, Yu & Liu, Xiongfei & Zhu, Yi, 2024. "Incremental marketization reforms and venture capital strategy adjustments: Based on industrial chain innovation development," Finance Research Letters, Elsevier, vol. 70(C).

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