Research On The Influence Of Controlling Shareholders’ Equity Pledge On Corporate Cash Dividend Policy

As an important financing method of Chinese listed companies,equity pledge is favored because of its convenience in procedures,less financing restrictions,and not affecting shareholders’ control over the company.By the end of 2020,the overall scale of pledged A-share market reached 486.5 billion shares,and 40 percent of the controlling shareholders of China’s A-share listed companies have realized stock pledge financing.With the gradual expansion of the scale of corporate share pledge,its risks are also prominent.After the controlling shareholder pledges his shares,if the stock price of the enterprise drops,the pledged shares will face the risk of forced liquidation,and the controlling shareholder may lose his control over the company.In order to avoid the occurrence of the above situation,the controlling shareholder will further exert influence on the company’s operation and financial decisions after the equity pledge and strengthen the management of market value.As an important financial policy of listed enterprises,cash dividend is one of the main ways for shareholders to obtain profits,and a window for the company to build a good reputation to the outside world.In addition,cash dividends can also affect the company’s earnings in the short term and have a significant impact on market value management.Then,how does the equity pledge of controlling shareholders affect the cash dividend policy of enterprises? This is the topic of this paper.In this paper,the relevant literature on equity pledge and cash dividend is sorted out.Based on the data of A-share listed companies from 2014 to 2020,the empirical analysis is carried out.Multiple regression and DID multi-time point differential model are adopted as empirical methods.Four robustness test methods,PSM matching method,placebo test,reverse-causality,and variable substitution method,are used to ensure the reliability of the conclusions.The research contents and conclusions of this paper are as follows:Firstly,based on the principal-agent theory and the private income theory of control rights,this paper analyzes and concludes that after the controlling shareholder’s equity pledge,the cash dividends of the pledged equity will be restricted,the controlling shareholder’s cash flow right will decline,and the degree of separation from the control rights will be increased,thus enhancing his motivation to seize corporate interests.At the same time,the less cash dividends are paid,the more cash surplus is conducive to the company’s business development,avoiding the decline of stock prices.At the empirical level,this paper obtained a significant negative correlation between the controlling shareholder’s equity pledge behavior and the cash dividend payment through multiple regression,that is,the controlling shareholder’s equity pledge will reduce the cash dividend payment level,and the higher the pledge ratio,the lower the cash dividend payment level.Secondly,the property right nature is added as the moderating variable.From the theoretical point of view,the equity pledge behavior of state-owned enterprises is subject to stricter regulatory restrictions.At the same time,state-owned enterprises usually have more financing channels,so they will not be forced to sell their shares when the equity is faced with the risk of liquidation.From an empirical point of view,this paper verifies that in non-state-owned enterprises,equity pledge of controlling shareholders has a stronger negative correlation with the level of cash dividend payment.Thirdly,this paper adopts DID differential model to study the impact before and after the occurrence of the event and finds that compared with the companies without the controlling shareholder’s equity pledge,the cash dividend payment level of the companies with the controlling shareholder’s equity pledge will decrease significantly after the equity pledge,which supplements the first conclusion of this paper.Fourthly,this paper further studies the influence of the degree of equity pledge on cash dividend policy and uses DID differential model to dig the influence of single equity pledge and continuous equity pledge on cash dividend payment.The empirical results show that the single equity pledge has no significant impact on cash dividend policy,while the continuous pledge will have a significant impact on cash dividend,and the longer the period of continuous equity pledge of the controlling shareholder,the stronger negative impact on the level of cash dividend payment,which is also an innovative conclusion proposed in this paper.Based on the above conclusions,this paper provides a new policy formulation perspective for preventing and controlling capital market risks and strengthening supervision and puts forward specific suggestions on improving the equity pledge system and cash dividend payment system.