Research On Non-controlling Major Shareholders’ Stock Pledge And Stock Price Crash Risk

By data analysis of equity pledge of listed companies in previous years,this paper finds that non controlling major shareholders’ equity pledge has an important impact on corporate governance and stock price.As of June 31,2021,2086 companies in A-shares market had used equity pledge financing,accounting for50.61% of the listed companies(excluding financial companies and ST companies).Among them,the non controlling major shareholders of 1458 companies have pledged their equity,accounting for 69.89%,and the average equity pledge proportion of non controlling major shareholders has reached 6.69%(accounting for their total share capital),which is enough to have a significant impact in the fluctuation of share price.Based on this,this paper mainly explores the relationship between the non controlling major shareholders’ equity pledge and stock price crash risk.Compared with the existing research on controlling shareholders’ equity pledge,this paper believes that there is an essential difference between non controlling shareholders and controlling shareholder.First,the controlling shareholder possesses the power of control,while non controlling major shareholders possess the power of supervision.After the equity pledge,the controlling shareholder has the problem of separating the control right from cash flow right,which does not exist for the non controlling major shareholders.Second,under the "mark to market" of equity pledge,the non controlling major shareholders of equity pledge have more motivation and ability to supervise and restrain the company.Moreover,compared with the controlling shareholder,they do not have the risk of control transfer and the power to manipulate the company’s profits.Therefore,their supervision and restraint have a more positive effect,which can reduce the risk of stock price collapse.Firstly,based on principal-agent theory and information hidden hypothesis,this paper examines the internal theoretical foundations of the influence of non controlling major shareholders’ equity pledge on stock price crash risk.This paper holds that equity pledge will increase the private benefits obtained by the non controlling major shareholders’ supervision of the company,reduce the "free rider" psychology of the non controlling major shareholders,and urge the non controlling major shareholders to transform their supervision intention into practical supervision behavior.The supervision of non controlling major shareholders reduces the possibility of controlling shareholders concealing bad news,the real information of the company will be gently reflected in the market,and the risk of stock price collapse will be reduced.Secondly,by analyzing the quarterly data of China’s A-share listed companies from January 2013 to June 2021,this paper conducts an empirical study on the influence of equity pledge by non controlling major shareholders on the stock price crash risk.The study found that compared with companies without equity pledge by non controlling major shareholders,companies with equity pledge by non controlling major shareholders have significantly lower risk of share price collapse.This conclusion is still valid after the dummy variable of whether to pledge is replaced by the pledge proportion of non controlling major shareholders and the robustness test of PSM + OLS regression.We further analyze the heterogeneity of the nature of the company’s property rights and the size of the market value.Compared with the state-owned listed companies,in the non-state-owned listed companies,the negative correlation between non controlling major shareholders’ equity pledge and stock price crash risk is stronger;Compared with small market value companies,in large market value companies,the negative correlation is stronger.The research contributions of this paper are as follows: first,The existing literature is limited to the research on the equity pledge of controlling shareholders,and does not take into account the importance of the equity pledge of non controlling shareholders.This paper points out the importance of equity pledge of non controlling shareholders(especially non controlling major shareholders)in corporate governance and stock price fluctuation for the first time,qualitatively and quantitatively analyzes the importance and economic consequences of non controlling major shareholders’ equity pledge,as well as the essential difference between non controlling major shareholders’ equity pledge and controlling shareholders’ equity pledge.Second,the existing literature has not yet studied the relationship between the pledge of non controlling major shareholders’ equity and the stock price crash risk.This paper supplements the research gap in this regard,that is,it is found that companies with equity pledge by non controlling major shareholders have significantly lower risk of share price collapse.Thirdly,This paper has a unique perspective on the impact path of stock price collapse risk.The previous literature studies the relationship between equity pledge and stock price collapse risk from the perspective of avoiding the transfer of control right after the controlling shareholder pledges his shares;This paper discusses the relationship from the perspective of supervision and restriction after equity pledge of non controlling major shareholders.