The Impact Of High Percentage Equity Pledges By Controlling Shareholders On Corporate Bond Credit Spreads

The study of the relationship between "high proportion" equity pledges by controlling shareholders and bond credit spreads in this paper can further enrich the existing literature on the factors influencing bond credit spreads and the economic consequences of equity pledges by controlling shareholders of listed companies,and deepen the understanding of equity pledging business and bond credit spreads.It will help the relevant market regulators to further standardise and regulate equity pledges in a more comprehensive and integrated manner,so that they can introduce relevant regulations and take relevant measures to control risks in a more targeted manner,and also provide certain insights and references for the governance of listed companies and the investment decisions of the public.In recent years,China has experienced frequent credit bond defaults,making it a key priority for the bond market to prevent and manage the risk of debt defaults and to prevent and resolve the infringement of bondholders’interests by shareholders pledging their shares.Compared to developed Western countries,China has a more serious "one share dominant" phenomenon,which means that the personal behavior of shareholders can have a significant impact on other stakeholders in the company.In recent years,the popular practice of stock pledge,especially high-ratio pledges as a personal disposal behavior of shareholders,may have a significant impact on the company and even the market.Based on this,this article selected A-share companies listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2020 as the research objects to capture the changes in share pledge situations and bond credit spreads over a certain period of time.Focusing on the "highratio" share pledge behavior of controlling shareholders,the study empirically investigates the impact of high-ratio share pledges on bondholders’ interests and their response to share pledges.The study found that controlling shareholders’ share pledges significantly increased the company’s bond credit spreads,with the negative impact of high-ratio pledges being particularly pronounced.Mechanism analysis shows that the impact of high-ratio pledges on credit spreads is more pronounced in listed companies with stock price fluctuations,high stock returns volatility,radical corporate strategies,and lower company transparency.These factors can cause bondholders’ risk expectations to increase,thereby increasing bond credit spreads.Furthermore,further research shows that the degree of equity balance and on-site investigations by investors can play a regulatory role.A better equity balance structure and more on-site investigations by institutional investors can weaken the negative impact of pledges on debt credit spreads,and internal equity balance and institutional investor on-site investigations can also curb controlling shareholders’ selfish behavior,helping to resolve shareholder infringement of bondholders’ interests.At the same time,empirical results show that the pledge business of non-state-controlled listed companies often carries greater risks,and the impact of "high-ratio"share pledges on bond credit spreads is enhanced for controlling shareholders.This article’s study of the relationship between controlling shareholders’ "high-ratio" share pledges and bond credit spreads can further enrich the existing literature on the influencing factors of bond credit spreads and the economic consequences of controlling shareholders’ share pledges.It can also provide a deeper understanding of stock pledge business and bond credit spreads,while helping relevant market regulatory agencies to regulate such behavior more maturely and effectively by issuing relevant regulations and taking measures.