The Impact of Controlling Shareholder Equity Pledge on Corporate Performance: Based on the Mediating Effect of Innovation Investment

Ping Nian

doi:10.54691/cfzkb641

Authors

Ping Nian

DOI:

https://doi.org/10.54691/cfzkb641

Keywords:

Equity Pledge; R&D Investment; Corporate Performance.

Abstract

The government has made investment in R&D a key strategic objective. Against the backdrop of active encouragement and strong support from the government, the amount of R&D investment by listed companies in China has been on the rise, which shows that R&D investment activities are increasingly valued by enterprises. While innovation is important for increasing the value of a company, it is also a high-risk, large expense. Innovative investment decisions are partially determined by shareholders. However, shareholders' judgement is linked to their personal risk appetite and funding position. Currently, equity pledges are popular in the financial markets. In this context, shareholders' attitudes towards risk are beginning to change. The control position of shareholders also began to be linked to the performance of the company. This paper selects the public data of A-share listed companies from 2015 to 2020. It investigates and analyses the relationship among controlling shareholders' equity pledges, R&D investment and corporate performance by means of the mediating effect analysis method and Bootstrap test. The study found that controlling shareholder equity pledges have a negative impact on firm performance and there is a masking effect of R&D investment between equity pledges and corporate performance. In response to the above findings, there are some suggestions put forward such as improving the equity pledge disclosure system and strengthening internal governance.

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