Stock pledge, risk of losing control and corporate innovation

Pang, Caiji; Wang, Ying

doi:10.1016/j.jcorpfin.2019.101534

Cited by 114 publications

(75 citation statements)

References 51 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%

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Share pledging and financial constraints in China

Cheng

Liu

Sun

2020

Accounting & Finance

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“…Zhou et al found similar findings, and pointed out that the financialization of non-financial firms can reduce their productivity [ 28 ]. Pang and Wang found that financialization can reduce non-financial firms’ investment in R&D, and this is the main reason for the decrease in production [ 29 ].…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

How High-Polluting Firms Suffer from Being Distracted form Intended Purpose: A Corporate Social Responsibility Perspective

Zhao

Chen

et al. 2020

IJERPH

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High-polluting industries are regarded as the main sources of air pollutant emissions and the major factors that significantly destroy the ecological environment. Corporate innovation in high-polluting industries improves the energy consumption efficiency and reduces the emission of air pollutant, which mitigates the conflict between environment and economy. Using the sample of China’s listed firms from 2010 to 2017, this study examines the impact of corporate social responsibility (CSR) and financialization on corporate innovation in high-polluting industries. The results show that there is a positive association between CSR and corporate innovation, while there is a negative association between financialization and corporate innovation. Furthermore, the financialization of high-polluting firms can alleviate the promotion role of CSR in the innovation process. The financialization of state-owned enterprises in high-polluting industries may not have a crowding-out effect on research and development (R&D), but it can limit the R&D promotion effect of CSR engagements. In contrast, the financialization of non-state-owned enterprises will hinder corporate innovation, but it will not affect the association between CSR and technology innovation. We also find that the financialization of high-polluting firms with low financial constraints can alleviate the promotion role of CSR engagements in innovation. Meanwhile, the CSR engagements of high-polluting firms with high financial constraints play a stronger role in corporate innovation. During the implementation of environmental policies, the negative association between financialization and corporate innovation has been strengthened. Our findings can encourage high-polluting firms to make more efforts in environmental protection and social stability.

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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 114 publications

References 51 publications

Share pledging and financial constraints in China

Share pledging and financial constraints in China

How High-Polluting Firms Suffer from Being Distracted form Intended Purpose: A Corporate Social Responsibility Perspective

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

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