|
|
|
| Controlling Shareholders' Share Pledging and Leverage Manipulation in High-Leverage Companies: Evidence from China |
| XU Xiaofang, TANG Taijie, LU Zhengfei
|
Business School, Beijing Technology and Business University;
Guanghua School of Management, Peking University |
|
|
|
Abstract Share pledge financing has become common in China's capital market; however, it often brings great risk, especially in high-leverage companies. Once a firm's stock price falls sharply after share pledging and touches the unwinding line, its controlling shareholder will be under great pressure and may lose control rights. Therefore, the controlling shareholder often has a strong motivation to drive the company to conduct market value management to prevent the stock price from crashing to the liquidation line; this is commonly achieved by changing accounting policy or adjusting the firm's information disclosure behavior. However, research on the impact of shareholder equity pledging on the quality of accounting information mainly focuses on income statements (especially the information quality of earnings) and seldom deals with balance sheets.
To reduce the risk of debt default and the forced liquidation of the pledged shares, the controlling shareholder, out of self-interest, may lead the company to cover up bad news using leverage manipulation after equity pledging. Leverage manipulation refers to reducing the leverage level presented on the balance sheet, via the use of financial activity arrangements (e.g., off-balance sheet liabilities) and other accounting methods (Xu and Lu, 2020). Leverage manipulation is an appropriate proxy for the quality of balance sheet information because the higher the leverage level is, the lower the balance sheet information quality is. Additionally, the delisting system plan announced by Shenzhen Stock Exchange and Shanghai Stock Exchange in 2012 added delisting conditions, such as a firm's net assets being negative (with a negative value at the end of one year, the end of two consecutive years, and the end of three consecutive years corresponding to a delisting risk warning, listing suspension, and termination of listing, respectively), making it difficult for listed companies to avoid delisting by merely manipulating profits. Therefore, controlling shareholders who have pledged equity in high-leverage firms often have strong incentives to drive firms to manipulate leverage to reduce the risk of control transfer due to the leverage indicator being suspended or terminated from listing.
Based on the balance sheet information of A-share non-financial listed companies with high leverage in China from 1999 to 2019, this paper empirically tests the influence of controlling shareholders' share pledging on the possibility and extent of corporate leverage manipulation. We find that high-leverage companies with share pledging by controlling shareholders are more likely to engage in leverage manipulation, and the higher the pledge ratio, the greater the degree of leverage manipulation. Our conclusions remain unchanged after a series of robustness tests considering any potential endogeneity problems. We also find that these influences are more pronounced in high-leverage companies with lower growth, greater pressure on short-term debt servicing, more media attention, and higher stock price crash risk.
The research contributions of this paper are as follows. First, it expands the literature on the influencing factors of leverage manipulation. The few studies on the influencing factors of leverage manipulation are mainly from the perspective of company characteristics (e.g., leverage ratio and financing restrictions); however, this paper focuses on the equity pledging of controlling shareholders. Second, it enriches the literature on the economic consequences of share pledging. Unlike previous studies, this paper focuses on balance sheet information and investigates the impact of equity pledging from the perspective of leverage manipulation. The results show that the manipulation of balance sheet information is an important economic consequence of leverage manipulation. Furthermore, the study provides empirical evidence that can serve as a reference for policymakers to prevent corporate leverage manipulation and standardize the share pledging of controlling shareholders. The findings also suggest the need to further regulate the equity pledging of controlling shareholders, especially in high-leverage companies with a high pledge ratio, and to guard against the adverse effects of leverage manipulation on systemic financial risks. The results indicate that to prevent limited credit funds from entering high-liability pledgers with leverage manipulation and improve the efficiency of credit resource allocation, it is necessary to strengthen the monitoring of the quality of balance sheet information.
|
|
Published: 02 November 2021
|
|
|
|
|
| [1] |
高然、陈忱、曾辉和龚六堂,2018,《信贷约束、影子银行与货币政策传导》,《经济研究》第12期,第68～82页。
|
| [2] |
纪志宏,2013,《存贷比地区差异研究——基于商业银行分行数据的研究》,《金融研究》第5期,第12～31页。
|
| [3] |
李刚、陈利军、陈倩和张人骥,2009,《经营租赁的真实动机——基于东方航空公司的案例研究》,《管理世界》第S1期,第121～128转134页。
|
| [4] |
陆蓉和兰袁,2021,《大股东股权质押与上市公司资本运作》,《金融研究》第4期,第169~186页。
|
| [5] |
南星恒和孙雪霞,2020,《控股股东股权质押、企业社会责任与真实盈余管理》,《投资研究》第1期,第60～76页。
|
| [6] |
饶艳超和胡奕明,2005,《银行信贷中会计信息的使用情况调查与分析》,《会计研究》第4期,第36～41转94～95页。
|
| [7] |
魏涛、陆正飞和单宏伟,2007,《非经常性损益盈余管理的动机、手段和作用研究——来自中国上市公司的经验证据》,《管理世界》第1期,第113～121转172页。
|
| [8] |
夏常源和贾凡胜,2019,《控股股东股权质押与股价崩盘:“实际伤害”还是“情绪宣泄”》,《南开管理评论》第5期,第165～177页。
|
| [9] |
谢德仁和廖珂,2018,《控股股东股权质押与上市公司真实盈余管理》,《会计研究》第8期,第21～27页。
|
| [10] |
谢德仁、郑登津和崔宸瑜,2016,《控股股东股权质押是潜在的“地雷”吗？——基于股价崩盘风险视角的研究》,《管理世界》第5期,第128～140转188页。
|
| [11] |
许年行、江轩宇、伊志宏和徐信忠,2012,《分析师利益冲突、乐观偏差与股价崩盘风险》,《经济研究》第7期,第127～140页。
|
| [12] |
许晓芳、陆正飞和汤泰劼,2020,《我国上市公司杠杆操纵的手段、测度与诱因研究》,《管理科学学报》第7期,第1～26页。
|
| [13] |
许晓芳和陆正飞,2020,《我国企业杠杆操纵的动机、手段及潜在影响》,《会计研究》第1期,第92～99页。
|
| [14] |
叶康涛和陆正飞,2004,《中国上市公司股权融资成本影响因素分析》,《管理世界》第5期,第127～131转142页。
|
| [15] |
Boehmer, E., C. M. Jones, and X. Zhang, 2020, “Potential Pilot Problems:Treatment Spillovers in Financial Regulatory Experiments,” Journal of Financial Economics, 135(1): 68～87.
|
| [16] |
Christensen, H. B., and V. V. Nikolaev, 2013, “Does Fair Value Accounting for Non-financial Assets Pass the Market Test？” Review of Accounting Studies, 18(3):734～775.
|
| [17] |
Daley, L. A., and R. L. Vigeland, 1983, “The Effects of Debt Covenants and Political Costs on the Choice of Accounting Methods,” Journal of Accounting and Economics, 5:195～211.
|
| [18] |
DeFond, M. L., and J. Jiambalvo, 1994, “Debt Covenant Violation and Manipulation of Accruals,” Journal of Accounting and Economics, 17(1-2) :145～176.
|
| [19] |
Feng, M., J. D. Gramlich, and S. Gupta, 2009, “Special Purpose Vehicles: Empirical Evidence on Determinants and Earnings Management,” The Accounting Review, 84(6): 1833～1876.
|
| [20] |
Kaplan, S. N., and L. Zingales, 1997, “Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints？” The Quarterly Journal of Economics, 112(1):169～215.
|
| [21] |
Kraft, P., 2015, “Rating Agency Adjustments to GAAP Financial Statements and Their Effect on Ratings and Credit Spreads,” The Accounting Review, 90(2) :641～674.
|
| [22] |
Landsman, W. R., K. V. Peasnell, and C. Shakespeare, 2008, “Are Asset Securitizations Sales or Loans？” The Accounting Review, 83(5): 1251～1272.
|
| [23] |
Mills, L. F., and K. J. Newberry, 2005, “Firms' Off-Balance Sheet and Hybrid Debt Financing: Evidence from Their Book-Tax Reporting Differences,” Journal of Accounting Research, 43(2) :251～282.
|
| [24] |
Roychowdhury, S., 2006, “Earnings Management Through Real Activities Manipulation,” Journal of Accounting and Economics, 42(3):3335～370.
|
| [25] |
Scott, T. W., C. I. Wiedman, and H. A. Wier, 2011, “Transaction Structuring and Canadian Convertible Debt,” Contemporary Accounting Research, 28(3):1046～1071.
|
|
|
|
