Research On The Impact Of Controlling Shareholder Equity Pledge On Enterprise Innovation Investment

The 14th five-year plan for national economic and social development of the People’s Republic of China and the outline of vision and objectives for 2035 clearly mentioned that we should adhere to innovation driven development,comprehensively shape new development advantages,improve the technological innovation capability of enterprises and improve the system and mechanism of scientific and technological innovation.If the enterprise wants to keep pace with the times,grasp the core competitive advantage and realize long-term development,it must carry out innovation activities continuously.The equity pledge business started in 2004,which means that the shareholders of listed companies pledge their equity to financial institutions to obtain the working capital.Unlike traditional financing channels,the advantages of the pledge business are as follows: fast financing,low financing cost and less restrictive conditions.It is deeply loved by the controlling shareholders.Therefore,the amount and market value of pledge in the capital market have also been significantly increased.As of january2020,the total number of Pledged Shares in China’s capital market has reached 578.9billion shares,and the market value of Pledged Shares is 4.72 trillion yuan.But with the development of the pledge business,there are also a series of problems,such as stock rights freeze,stock price "deflating",which caused investors panic.On the surface,the pledge of the controlling shareholder’s equity is only its personal behavior,but there is a common problem in the listed companies in China.The behavior of the controlling shareholder will certainly affect the development of the company,and the motivation and the risk of the pledge will affect the attitude of the controlling shareholder and the decision-making of the company.On the one hand,during the period of equity pledge,the income generated by the equity belongs to the pledgee,which makes the controlling shareholder’s income right and the company control right separate from each other,weakening the incentive to the controlling shareholder,increasing the second kind of agency cost and increasing the hollowing out of the listed company;on the other hand,during the period of equity pledge,the stock price of the listed company is directly linked with the control right of the controlling shareholder.When When the company’s share price falls to the closing line,if remedial measures are not taken in time,it will face the risk of control transfer.Innovation investment has the characteristics of large investment,long cycle and high risk.If the failure of innovation investment project leads to the stock price falling,the controlling shareholder will be required to continue to increase the pledged goods or face the pressure of closing the position of the stock held,which will shake the controlling position of the controlling shareholder in the listed company.So,will the pledge of the controlling shareholder have an impact on the innovation investment of the listed companies? The proportion of the holding shareholders is different,and the cost of hollowing and the risk of controlling right transfer are different.What is the difference between the impact of the pledge on the innovation investment of the listed companies? After the equity pledge,the second kind of agency problem will be intensified.What is the difference between the second kind of agency cost and the impact of equity pledge on innovation investment? And the equity pledge to some extent represents the enterprise is in financial difficulties.The risk of financial distress is different.How is the impact of equity pledge on innovation investment of listed companies different?Based on the above background,this paper systematically combs the relevant literature on the motivation,risk,economic consequences and innovation investment of equity pledge.Based on the principal-agent theory,private interest theory of control right,signal transmission theory,short-term theory and innovation theory,this paper puts forward research hypothesis and determines the research variables.This paper selects the listed companies in the non-financial industry of Shanghai and Shenzhen A-share market from 2007 to 2019 as the research sample,and establishes a fixed effect model.Through descriptive analysis,t-test,regression analysis and robustness test,the paper explores whether the pledge of controlling shareholders’ equity will have a inhibitory effect on the innovation investment of listed companies.Then,it analyzes how the influence of the share pledge of the controlling shareholder on the innovation investment of the listed companies is different when the proportion of the holding shareholders,the second kind of agency cost and the risk of financial distress are different.The research of this paper finds that after the pledge of the controlling shareholder’s equity,the innovation investment level of listed companies has decreased significantly,which is mainly because on the one hand,the share pledge intensifies the degree of separation of the two rights,and the controlling shareholders have the motivation to dig the resources of the listed companies for private profit,which will inevitably squeeze the innovation investment of the enterprise;on the other hand,the control rights and share prices of the controlling shareholders during the period of equity pledge will be squeezed;on the other hand,the control rights and share prices of the controlling shareholders during the pledge of Linked,in order to avoid the stock price decline to control the transfer,will reduce the risk of greater innovation activities.Further research shows that compared with the listed companies with high shareholding ratio of controlling shareholders,the lower the shareholding ratio of controlling shareholders,the lower the cost of hollowing out and the risk transfer of control right are large.In order to prevent the control of the investors,they have to reduce the innovation investment,so the more significant the inhibition effect on the innovation investment of the listed companies is;when the second kind of agency cost is higher,the controlling shareholders tend to extend the investment When the "grab hand" is taken,the controlling shareholder’s equity pledge has more significant inhibition on the innovation investment of listed companies,which verifies the motivation of the shareholders’ hollowing;when the risk of financial distress is high,the controlling shareholder’s equity pledge has more significant inhibition on the innovation investment of listed companies,mainly because the more serious the financial difficulties,it may tend to empty the listed companies The greater the risk of financial distress will affect the stock price,which will lead to the increase of risk of control transfer,thus restraining the innovation investment of listed companies.This conclusion enriches the existing scholars’ research on the influencing factors of equity pledge and innovation investment of listed companies,which has certain guiding significance for promoting the sound development of the stock pledge market,standardizing the behavior of controlling shareholders,providing suggestions for small and medium-sized shareholders and investors and improving the independent innovation ability of enterprises.