Stock Pledge, Risk of Losing Control and Corporate Innovation

Pang, Caiji; Wang, Ying

doi:10.2139/ssrn.3282145

Cited by 10 publications

(22 citation statements)

References 56 publications

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“…Share pledging also affects firms’ investment strategies. Managers in companies with share‐based loans are likely to apply conservative investment policies by reducing research and development (R&D) and capital expenditures, as controlling shareholders are afraid of losing their control rights in the case of innovation failure (Pang and Wang, 2018; Dou et al ., 2019). In general, share‐based loans are investigated to have a negative impact on firms’ valuation and cause agency conflicts between corporate insiders and outside shareholders.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…However, as we discussed in Hypothesis 2, there is a likelihood that controlling shareholders collateralise their shares for corporate purposes (Singh, 2018). As controlling shareholders are the ultimate decision‐makers in Chinese firms (Pang and Wang, 2018), their engagement in share pledging may be more helpful to finance corporate projects compared with other pledgers. As mentioned by Li et al .…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…As pledging insiders are likely to lose their control rights after sell‐offs, insiders have incentives to support stock prices by manipulating their companies’ strategies, which negatively affects firms’ performance. One example can be that pledging firms are more likely to employ earnings management, repurchasing programs or conservative innovation projects, relative to non‐pledging firms (Chan et al ., 2018; DeJong et al ., 2018; Pang and Wang, 2018). Previous work regarding share pledging focuses on the impact of pledge activities on shareholders but provides little explanation on what may contribute to corporate insiders’ engagement in share pledging despite its costly consequences.…”

Section: Introductionmentioning

confidence: 99%

“…The results validate the use of share‐based loans as an expropriation mechanism for the overall group of shareholders but as alternative corporate financing strategy for controlling shareholders. Our definition of share pledging could add to a growing body of related literature, as the previous studies are commonly limited to a small group of pledgers, including the controlling shareholder, directors and named executives (Anderson and Puleo, 2015; Pang and Wang, 2018; Wang and Chou, 2018; Li et al ., 2019). We provide a potential explanation to the previous research by Li et al .…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Share pledging and financial constraints in China

Cheng

Liu

Sun

2020

Accounting & Finance

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We investigate the relationship between the intensity of share pledging activities and the level of financial constraint in publicly listed firms in China. We show that the high financial constraint level may motivate insiders to use share pledging as an alternative funding source and an expropriation mechanism. Although overall share collateralisation can cause a subsequently more constrained financing condition, we find evidence that share pledging made by the controlling shareholder is likely to mitigate financial constraints in the following year. Our findings are robust to alternative measures and an instrumental variable for dealing with endogeneity problems.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Share pledging and financial constraints in China

Cheng

Liu

Sun

2020

Accounting & Finance

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“…Drawing on Pang and Wang [88] and Park [89], we assume financial accident occurring for corporation c i if and only if his capital for investment is less than zero, i.e., W i t < 0. Further the strong connection social network of entrepreneurs is supposed to be playing a role of risk spreading following the mainstream conclusions of social capital literatures [90,91].…”

Section: Assumption 3 (A3) Entrepreneurs Maintain Their Social Network To Maximize Their Expected Return On Investmentmentioning

confidence: 99%

Entrepreneurs’ Social Network and Corporate Risk Contagion: A Dynamic Evaluation and Simulation Approach

Yang

Qian

2020

Complexity

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Interactions of entrepreneurs through social networks provide an available path for corporate risk contagions. However, the issue how entrepreneurs’ social networks influence on corporate risk contagion is still received limited attention from scholars. In this study, a framework is proposed to describe entrepreneurs’ interaction and corporate value creation. The main results of multiagent simulations indicate the following. First, either weak ties or strong connections of social networks can enhance density of corporate risk contagion. However, only strong connections can be moderated by entrepreneurs’ risk preference. Second, weak ties improve risk exposure of individual corporations, while strong connections may probably decrease systematical risk of the market. Third, weak ties are important for mature corporations to achieve business success. However, for startups, strong connections are more valuable to maintain. The findings of this study not only provide theoretical support from some widely accepted economic phenomenon but also provide explanations for conflicting results from some previous literatures.

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Corporate social responsibility and corporate innovation output: Empirical evidence based on Chinese listed companies

Bai

2022

Manage Decis Econ

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This study investigated the relation between corporate social responsibility (CSR) fulfillment and corporate innovation output based on a sample of 9165 Chinese listed companies. The present findings revealed that CSR fulfillment promoted corporate innovation output. Government subsidies and research and development investment showed significant mediating effects on the relation between CSR fulfillment and corporate innovation output. Additionally, the policy implementation of mixed ownership reform and corporate size had a significant moderating effect on this relation. Finally, the research revealed that CSR fulfillment not only promoted corporate innovation output but also improved corporate performance and the market value of a company.

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Stock Pledge, Risk of Losing Control and Corporate Innovation

Cited by 10 publications

References 56 publications

Share pledging and financial constraints in China

Share pledging and financial constraints in China

Entrepreneurs’ Social Network and Corporate Risk Contagion: A Dynamic Evaluation and Simulation Approach

Corporate social responsibility and corporate innovation output: Empirical evidence based on Chinese listed companies

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