One way out of the share pledging quagmire: Evidence from mergers and acquisitions

Zhu, Bing; Xia, Xiaoxue; Zheng, Xiaojia

doi:10.1016/j.jcorpfin.2021.102120

Cited by 31 publications

(16 citation statements)

References 105 publications

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“…Following the literature (e.g., Z. He et al., 2022; Zhu et al., 2021 ), we define the baseline pledging price as the average stock price of the 20 trading days before the SP. We assume the pledge rates for the Mainboard, SME board and ChiNext board to be 50%, 40% and 30%, respectively.…”

Section: Resultsmentioning

confidence: 99%

Does share pledging affect corporate philanthropy? Evidence from China

Xiong

Tong

Zhang

et al. 2023

Business Fin & Account

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We investigate the effect of insiders’ share pledging (SP) on corporate philanthropy and find that SP firms engage in corporate philanthropy more often than non‐SP firms. This effect is more pronounced for firms with higher downward price pressure or margin call risks. Our results remain robust after using alternative measures and addressing endogeneity issues. We also sample a group of SP and non‐SP firms that make comparable philanthropic donations and find that SP firms show better market performance and lower downside risks of stock price movements than non‐SP firms, indicating that SP firms use corporate philanthropy to alleviate margin call risks.

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Section: Resultsmentioning

confidence: 99%

Does share pledging affect corporate philanthropy? Evidence from China

Xiong

Tong

Zhang

et al. 2023

Business Fin & Account

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“…Heterogeneity. Despite the proactiveness of large family firms toward R&D investments and patent applications (Zulfiqar et al, 2020), in environments with medium levels of institutional protection, family ownership has a negative relationship with R&D activities (Chen & Hsu, 2009;Choi et al, 2015;Liu et al, 2017), and family involvement negatively influences innovation (Chung, 2013). However, family firms are proficient at converting R&D investments into patents , especially when the board chair is a family member (Jiang et al, 2020).…”

Section: Innovation Of Large Firms (N=25)mentioning

confidence: 99%

Strategic Change in Family Firms: A Review From an Institutional Environment and Firm Size Perspective

Skorodziyevskiy,

Sherlock,

et al. 2024

Family Business Review

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Using a framework that intersects strategic management and institutional economics, we show how differences in institutional environments and firm resources influence different types of strategic change (i.e., internationalization, innovation, and diversification) in family firms. We review 193 quantitative and qualitative articles to identify differences in strategic change and their performance consequences among family firms and between family and nonfamily firms. We conclude that institutional environments and firm resources impact not only the extent family firms engage in different types of strategic change but also their performance and long-term survival.

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“…Thus, high shareholder leverage may lead to excessive risk-taking by public companies. Nevertheless, prior research has shown that the risk of control transfer is exacerbated by increased share pledges due to the impact of margin call systems (Zhu et al, 2021 ). Faced with the pressure of losing control, the ultimate owner may transfer personal risk to the firm.…”

Section: Empirical Analysismentioning

confidence: 99%

Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies

Xia

Zhang

et al. 2022

Front. Psychol.

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The impact of personal risk caused by controlling shareholders' equity pledges on the company's debt policy is an issue worth exploring. Using Chinese A-share listed companies from 2006 to 2020, this paper studies the impact of ultimate owner equity pledges on firm debt size and debt maturity structure and explores the mechanism of ultimate owner personal leverage on firms. The results show that the increase in ultimate owner stock pledges leads to higher financial leverage and a longer debt maturity structure for the company. In addition, the study reveals that the high personal leverage of the ultimate owner of the pledged equity is an influential mechanism driving the transfer of personal risk to the firm. In particular, even if a company's actual debt ratio is higher than its target debt ratio, equity pledges can prompt listed companies to increase their debt ratios and debt maturities, causing them to take on excessive debt risk and transfer the risk to creditors. It follows that the tunneling effect is a driving force of equity pledging and corporate debt policies. These results remain robust after the robustness test and endogenous test. The conclusions of this paper not only emphasize the impact of shareholders' personal risk on the firm but also provide a reference for investors' perception of firm risk.

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One way out of the share pledging quagmire: Evidence from mergers and acquisitions

Cited by 31 publications

References 105 publications

Does share pledging affect corporate philanthropy? Evidence from China

Does share pledging affect corporate philanthropy? Evidence from China

Strategic Change in Family Firms: A Review From an Institutional Environment and Firm Size Perspective

Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies

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