Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company
The equity pledge has become a universal practice in the world. Taking Chinese listed companies from 2007 to 2020 as a sample, this paper investigates the influence of controlling shareholders’ equity pledges on M&A behavior. It is found that the probability of M&A of listed companie...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Frontiers Media S.A.
2022-04-01
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| Series: | Frontiers in Psychology |
| Subjects: | |
| Online Access: | https://www.frontiersin.org/articles/10.3389/fpsyg.2022.898118/full |
| _version_ | 1818011122105581568 |
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| author | Xintao Li Qian Li |
| author_facet | Xintao Li Qian Li |
| author_sort | Xintao Li |
| collection | DOAJ |
| description | The equity pledge has become a universal practice in the world. Taking Chinese listed companies from 2007 to 2020 as a sample, this paper investigates the influence of controlling shareholders’ equity pledges on M&A behavior. It is found that the probability of M&A of listed companies is greater when the controlling shareholder has an equity pledge (or the proportion of equity pledge of controlling shareholder is higher). M&A activities can raise the stock price and play the role of market value management. Controlling shareholders with margin call pressure have stronger motivation to use M&A to increase their share price. Investors seem to be aware of this behavior and underestimate the potential benefits of M&A under this pressure. Propensity score matching (PSM) and difference in difference (DID) were used to test endogeneity and the results were still robust. Overall, our results reveal the impact of equity pledges by controlling shareholders on M&A. Furthermore, margin call pressure, this organizational psychology promotes this possibility. |
| first_indexed | 2024-04-14T06:03:23Z |
| format | Article |
| id | doaj.art-3f67bfdad2394b7f92baba7611125565 |
| institution | Directory Open Access Journal |
| issn | 1664-1078 |
| language | English |
| last_indexed | 2024-04-14T06:03:23Z |
| publishDate | 2022-04-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Psychology |
| spelling | doaj.art-3f67bfdad2394b7f92baba76111255652022-12-22T02:08:39ZengFrontiers Media S.A.Frontiers in Psychology1664-10782022-04-011310.3389/fpsyg.2022.898118898118Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed CompanyXintao LiQian LiThe equity pledge has become a universal practice in the world. Taking Chinese listed companies from 2007 to 2020 as a sample, this paper investigates the influence of controlling shareholders’ equity pledges on M&A behavior. It is found that the probability of M&A of listed companies is greater when the controlling shareholder has an equity pledge (or the proportion of equity pledge of controlling shareholder is higher). M&A activities can raise the stock price and play the role of market value management. Controlling shareholders with margin call pressure have stronger motivation to use M&A to increase their share price. Investors seem to be aware of this behavior and underestimate the potential benefits of M&A under this pressure. Propensity score matching (PSM) and difference in difference (DID) were used to test endogeneity and the results were still robust. Overall, our results reveal the impact of equity pledges by controlling shareholders on M&A. Furthermore, margin call pressure, this organizational psychology promotes this possibility.https://www.frontiersin.org/articles/10.3389/fpsyg.2022.898118/fullmargin call pressurecontrolling shareholderequity pledgemergers and acquisitionsagency theoryG18 |
| spellingShingle | Xintao Li Qian Li Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company Frontiers in Psychology margin call pressure controlling shareholder equity pledge mergers and acquisitions agency theory G18 |
| title | Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company |
| title_full | Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company |
| title_fullStr | Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company |
| title_full_unstemmed | Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company |
| title_short | Does Margin Call Pressure Affect the M&A Decision of Controlling Shareholders With Equity Pledges: Evidence From Chinese Listed Company |
| title_sort | does margin call pressure affect the m a decision of controlling shareholders with equity pledges evidence from chinese listed company |
| topic | margin call pressure controlling shareholder equity pledge mergers and acquisitions agency theory G18 |
| url | https://www.frontiersin.org/articles/10.3389/fpsyg.2022.898118/full |
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