Controlling shareholder equity pledges,executive incentives and stock price volatility
In order to avoid the risk of being closed out,controlling shareholders should have an incentive to reduce the risk of share price volatility after pledging their equity,which has been explored in the existing literature but the conclusions are inconsistent and the specific mecha-nisms are unclear.This paper theoretically analyses the negative relationship between corporate controlling shareholder equity pledges and corporate share price volatility and its specific mech-anisms and paths,and selects A-share listed companies'data from 2007 to 2021 for empirical testing.It is found that:The share price volatility of a company does decrease significantly af-ter controlling shareholders'equity pledge;in order to maintain short-term share price stability,listed companies increase the short-term remuneration of company executives after controlling shareholders'equity pledge,both in terms of absolute quantity and relative weighting;and exec-utive incentives play a partially mediating role between controlling shareholders'equity pledge and corporate share price volatility.Further research shows that the smoothing effect of control-ling shareholders in making equity pledges on share price volatility is not achieved by increasing the firm's performance capabilities and surplus management levels,reducing information asym-metries and tunneling by large shareholders.The heterogeneous results also fully illustrate that non-state-controlled listed firms are more sensitive to equity pledges by controlling shareholders.This paper explores the role of controlling shareholders'equity pledges on share price volatility and its mechanism,which theoretically complements the literature on share price volatility and provides corresponding suggestions for external investors,financial institutions and government departments,offering new ideas to enhance the efficiency of corporate governance of listed com-panies.
NETL
NSTL
万方数据
维普
