Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies
The impact of personal risk caused by controlling shareholders' equity pledges on the company's debt policy is an issue worth exploring. Using Chinese A-share listed companies from 2006 to 2020, this paper studies the impact of ultimate owner equity pledges on firm debt size and debt matur...
| Main Authors: | , , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Frontiers Media S.A.
2022-11-01
|
| Series: | Frontiers in Psychology |
| Subjects: | |
| Online Access: | https://www.frontiersin.org/articles/10.3389/fpsyg.2022.1010162/full |
| _version_ | 1828129114468384768 |
|---|---|
| author | Jiahui Xia Zhanchi Wu Rongwu Zhang Xiangyi Chen Rui Zhang |
| author_facet | Jiahui Xia Zhanchi Wu Rongwu Zhang Xiangyi Chen Rui Zhang |
| author_sort | Jiahui Xia |
| collection | DOAJ |
| description | The impact of personal risk caused by controlling shareholders' equity pledges on the company's debt policy is an issue worth exploring. Using Chinese A-share listed companies from 2006 to 2020, this paper studies the impact of ultimate owner equity pledges on firm debt size and debt maturity structure and explores the mechanism of ultimate owner personal leverage on firms. The results show that the increase in ultimate owner stock pledges leads to higher financial leverage and a longer debt maturity structure for the company. In addition, the study reveals that the high personal leverage of the ultimate owner of the pledged equity is an influential mechanism driving the transfer of personal risk to the firm. In particular, even if a company's actual debt ratio is higher than its target debt ratio, equity pledges can prompt listed companies to increase their debt ratios and debt maturities, causing them to take on excessive debt risk and transfer the risk to creditors. It follows that the tunneling effect is a driving force of equity pledging and corporate debt policies. These results remain robust after the robustness test and endogenous test. The conclusions of this paper not only emphasize the impact of shareholders' personal risk on the firm but also provide a reference for investors' perception of firm risk. |
| first_indexed | 2024-04-11T16:14:50Z |
| format | Article |
| id | doaj.art-e16b8bb3b56b48809c2aca2a521c729d |
| institution | Directory Open Access Journal |
| issn | 1664-1078 |
| language | English |
| last_indexed | 2024-04-11T16:14:50Z |
| publishDate | 2022-11-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Psychology |
| spelling | doaj.art-e16b8bb3b56b48809c2aca2a521c729d2022-12-22T04:14:34ZengFrontiers Media S.A.Frontiers in Psychology1664-10782022-11-011310.3389/fpsyg.2022.10101621010162Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policiesJiahui Xia0Zhanchi Wu1Rongwu Zhang2Xiangyi Chen3Rui Zhang4School of Management, Jinan University, Guangzhou, ChinaSchool of Management, Jinan University, Guangzhou, ChinaSchool of Management, Guangzhou University, Guangzhou, ChinaSchool of Management, Jinan University, Guangzhou, ChinaDepartment of Economics, Jinan University, Guangzhou, ChinaThe impact of personal risk caused by controlling shareholders' equity pledges on the company's debt policy is an issue worth exploring. Using Chinese A-share listed companies from 2006 to 2020, this paper studies the impact of ultimate owner equity pledges on firm debt size and debt maturity structure and explores the mechanism of ultimate owner personal leverage on firms. The results show that the increase in ultimate owner stock pledges leads to higher financial leverage and a longer debt maturity structure for the company. In addition, the study reveals that the high personal leverage of the ultimate owner of the pledged equity is an influential mechanism driving the transfer of personal risk to the firm. In particular, even if a company's actual debt ratio is higher than its target debt ratio, equity pledges can prompt listed companies to increase their debt ratios and debt maturities, causing them to take on excessive debt risk and transfer the risk to creditors. It follows that the tunneling effect is a driving force of equity pledging and corporate debt policies. These results remain robust after the robustness test and endogenous test. The conclusions of this paper not only emphasize the impact of shareholders' personal risk on the firm but also provide a reference for investors' perception of firm risk.https://www.frontiersin.org/articles/10.3389/fpsyg.2022.1010162/fullshare pledgedebt policytunnelpersonal riskrisk shiftingrisk-taking |
| spellingShingle | Jiahui Xia Zhanchi Wu Rongwu Zhang Xiangyi Chen Rui Zhang Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies Frontiers in Psychology share pledge debt policy tunnel personal risk risk shifting risk-taking |
| title | Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies |
| title_full | Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies |
| title_fullStr | Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies |
| title_full_unstemmed | Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies |
| title_short | Shareholder personal risk and firm risk: An empirical analysis of share pledges and firm debt policies |
| title_sort | shareholder personal risk and firm risk an empirical analysis of share pledges and firm debt policies |
| topic | share pledge debt policy tunnel personal risk risk shifting risk-taking |
| url | https://www.frontiersin.org/articles/10.3389/fpsyg.2022.1010162/full |
| work_keys_str_mv | AT jiahuixia shareholderpersonalriskandfirmriskanempiricalanalysisofsharepledgesandfirmdebtpolicies AT zhanchiwu shareholderpersonalriskandfirmriskanempiricalanalysisofsharepledgesandfirmdebtpolicies AT rongwuzhang shareholderpersonalriskandfirmriskanempiricalanalysisofsharepledgesandfirmdebtpolicies AT xiangyichen shareholderpersonalriskandfirmriskanempiricalanalysisofsharepledgesandfirmdebtpolicies AT ruizhang shareholderpersonalriskandfirmriskanempiricalanalysisofsharepledgesandfirmdebtpolicies |