|
|
|
| Corporate Performance Reference Points and Controlling Shareholder's Share Pledging: Motivations and Governance |
| JIANG Fuwei, CHEN Yiyao, DING Hui
|
Center for Macroeconomic Research/ School of Economics/ The Wang Yanan Institute for Studies in Economics, Xiamen University;
School of Finance, Central University of Finance and Economics;
School of Economics and Management, Beijing Jiaotong University |
|
|
|
Abstract Share pledging serves as a crucial financing method for controlling shareholders in China's listed companies. By pledging shares, controlling shareholders can obtain financing from financial institutions using their holdings as collateral. However, share pledging carries high-risk characteristics. If a company's stock price declines rapidly or the borrower fails to repay the loan upon maturity, the controlling shareholder may face the risk of forced liquidation of pledged shares, potentially leading to a loss of control. A sharp decline in stock prices can easily trigger discounted share sales and risk contagion, thereby evolving into systemic risks. Therefore, clarifying the economic motivations and governance mechanisms behind controlling shareholders' share pledging holds significant practical importance for preventing financial risks and promoting high-quality development of listed companies.
We innovatively integrate prospect theory with the behavioral theory of firms to propose a corporate behavior framework that accounts for decision-maker heterogeneity. Since both prospect theory and the behavioral theory of firms originated in Western countries where corporate ownership structures are dispersed and management serves as key decision-makers, existing literature has primarily investigated reference point effects from a managerial perspective. However, China's corporate landscape features high ownership concentration, with controlling shareholders of listed companies often serving as de facto controllers, whose risk preferences may also be influenced by performance reference points. Theoretical analysis demonstrates that when corporate performance falls below the reference point, controlling shareholders operate in a loss domain, leading to increased risk appetite. This paper accordingly proposes that when corporate performance falls below the reference point, controlling shareholders exhibit enhanced risk-seeking tendencies, increasing the likelihood of engaging in high-risk financing through share pledging.
This study selects A-share listed companies in China from 2000 to 2022 as its sample, using the median performance of firms in the same industry with identical ownership types as the reference point to empirically test the impact of corporate performance relative to this benchmark on controlling shareholders' share pledging. The findings indicate that when corporate performance falls below the reference point, both the probability and proportion of share pledging by controlling shareholders increase significantly. To alleviate endogeneity concerns, this paper employs regression discontinuity estimation, sample matching methods, and the exclusion of other reference.points, with the results remaining robust. In analyzing economic motivations, this paper categorizes pledging behaviors from the perspective of individual controlling shareholders into three types of motivations: first, investment motivation, where controlling shareholders use funds obtained from pledging to invest in other projects or financial markets with higher returns; second, tunneling motivation, where controlling shareholders use pledging to expropriate listed companies or transfer profits to safeguard personal gains; and third, propping motivation, where controlling shareholders use pledging to raise funds for listed companies to alleviate financing constraints. Empirical results demonstrate that when performance falls below the reference point, high pledge ratios are often associated with external investments or tunneling behaviors, while low pledge ratios more frequently reflect objectives supporting corporate development. Regarding the governance effects of external shareholders, both minority investor supervision and state capital participation suppress controlling shareholders' share pledging motivations, while institutional investors adopt a contingent approach, promoting propping motivations while inhibiting tunneling motivations.
The main contributions of this paper are threefold: First, by integrating prospect theory with the behavioral theory of firms, it proposes a corporate behavior framework incorporating decision-maker heterogeneity, revealing changes in risk preferences of controlling shareholders as core decision-makers when performance deviates from reference points, thereby enriching the research paradigm of the behavioral theory of firms. Second, it identifies the economic motivations through which performance reference points influence share pledging and clarifies the relationship between share pledging ratios and different motivations, providing new insights for identification and categorized regulation. Third, it reveals the governance effects of external shareholders on share pledging, demonstrating that minority investor supervision and state capital participation suppress share pledging motivations, while institutional investors exercise contingent governance. These findings provide empirical evidence for improving the share pledging risk governance system in China.
Overall, we find that corporate performance reference points serve as crucial psychological and behavioral benchmarks explaining controlling shareholders' share pledging behavior. When corporate performance falls below the reference point, controlling shareholders' risk preferences increase, leading them to favor financing through share pledging. Their behavioral motivations include investment motives, tunneling motives and propping motives. This paper provides policy implications for regulatory authorities to improve categorized regulation, strengthen external supervision, and prevent systemic risks.
|
|
Received: 27 November 2024
Published: 05 December 2025
|
|
|
|
|
| [1] |
贺小刚、贾植涵、彭屹和李新春,2022,《财富预期与企业家冒险行为:进取还是越轨？》,《管理世界》第10期,第226～243页。
|
| [2] |
姜付秀,2022,《公司治理:基本原理及中国特色》,中国人民大学出版社。
|
| [3] |
姜富伟、丁慧和靳馥境,2023,《参照点效应、公司治理与上市公司财务重述》,《经济研究》第10期,第191～208页。
|
| [4] |
姜富伟、丁慧、张芷宁和何冬昕,2024,《混合所有制改革与民营企业精准扶贫——基于资源互补和监督制衡的视角》,《经济管理》第2期,第91～109页。
|
| [5] |
柯艳蓉、李玉敏和吴晓晖,2019,《控股股东股权质押与企业投资行为——基于金融投资和实业投资的视角》,《财贸经济》第4期,第50～66页。
|
| [6] |
黎来芳,2005,《商业伦理、诚信义务与不道德控制——鸿仪系“掏空”上市公司的案例研究》,《会计研究》第11期,第8～14页。
|
| [7] |
连燕玲、郑伟伟和高皓,2023,《创新困境下的制造业企业战略响应——基于创新绩效期望落差与响应式搜索行为的研究》,《中国工业经济》第8期,第174～192页。
|
| [8] |
梁上坤和陈冬华,2015,《大股东会侵犯管理层利益吗？——来自资金占用与管理层人员变更的经验证据》,《金融研究》第3期,第192～206页。
|
| [9] |
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。
|
| [10] |
陆艺升、罗荣华和朱菲菲,2024,《机构投资者相机抉择与控股股东股权质押及其公司治理效应》,《经济研究》第7期,第111～129页。
|
| [11] |
王垒、曲晶、赵忠超和丁黎黎,2020,《组织绩效期望差距与异质机构投资者行为选择:双重委托代理视角》,《管理世界》第7期,第132～153页。
|
| [12] |
汪先珍和马成虎,2022,《股权质押与公司估值:理论与实证》,《金融研究》第12期,第187～206页。
|
| [13] |
许晓芳和陆正飞,2023,《股权质押融资存在“柠檬现象”吗？——来自股价崩盘风险的证据》,《金融研究》第12期,第56～73页。
|
| [14] |
杨大宇、许晓芳和陆正飞,2023,《金融结构与企业过度投资:基于社会融资结构的证据》,《管理世界》第7期,第121～140页。
|
| [15] |
郑国坚、林东杰和林斌,2014,《大股东股权质押、占款与企业价值》,《管理科学学报》第9期,第72～87页。
|
| [16] |
朱菲菲和杨云红,2022,《控股股东股权质押融资与上市公司实体投资——融资约束还是市场信息？》,《经济科学》第3期,第79～94页。
|
| [17] |
宗计川、庄妍和李晓伟,2023,《质权人困境:股票折价抛售与同行风险传染》,《管理世界》第1期,第77～99页。
|
| [18] |
Baker, M., X. Pan and J. Wurgler, 2012, “The Effect of Reference Point Prices on Mergers and Acquisitions”, Journal of Financial Economics, 106(1): pp.49～71.
|
| [19] |
Cheng, Z., Z. Liu and Y. Sun, 2021, “Share Pledging and Financial Constraints in China”, Accounting & Finance, 61(3): pp.4147～4189.
|
| [20] |
Cyert, R.M. and J.G. March, 1963, A Behavioral Theory of the Firm, Prentice Hall/Pearson Education.
|
| [21] |
He, Z., B. Liu and F. Zhu, 2022, “Share Pledging in China: Funding Listed Firms or Funding Entrepreneurship？ ”,NBER Working Paper, No, 29731.
|
| [22] |
Pan, X. and M, Qian,2024, “Firm Financing Through Insider Stock Pledges”, Review of Finance, 28(2): pp.621～659.
|
| [23] |
Kahneman, D. and A. Tversky, 1979, “Prospect Theory: An Analysis of Decision under Risk”, Econometrica, 47(2): pp.263～291.
|
| [24] |
Klein, A. and E. Zur, 2009, “Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors”, The Journal of Finance, 64(1): pp.187～229.
|
| [25] |
Peng, M.W. and Y. Jiang, 2010, “Institutions Behind Family Ownership and Control in Large Firms”, Journal of Management Studies, 47(2): pp.253～273.
|
| [26] |
Shi, Y., J. Li and R. Liu, 2023, “Financing Constraints and Share Pledges: Evidence from the Share Pledge Reform in China”, Journal of Corporate Finance, 78: pp.102337.
|
| [27] |
Tversky, A. and D. Kahneman, 1992, “Advances in Prospect Theory: Cumulative Representation of Uncertainty”, Journal of Risk and Uncertainty, 5(4): pp.297～323.
|
| [28] |
Whited, T. and G. Wu, 2006, “Financial Constraints Risk”, The Review of Financial Studies, 19(2): pp.531～559.
|
| [29] |
Xu, D., K.Z. Zhou, and F. Du, 2019, “Deviant versus Aspirational Risk Taking: The Effects of Performance Feedback on Bribery Expenditure and R&D Intensity”, Academy of Management Journal, 62(4): pp.1226～1251.
|
| [30] |
Yermack, D, 2010, “Shareholder Voting and Corporate Governance”, Annual Review of Financial Economics, 2(1): pp.103～125.
|
|
|
|
