Private firms' financial constraints and share pledging by controlling shareholders of publicly listed firms: Evidence from China

Kai Guo, Bin Ke and Song Tang

Journal of Corporate Finance, 2023, vol. 80, issue C

Abstract: Private firms face significant financial constraints that limit their investment and growth. Recognizing the fact that many private firms belong to business groups that contain at least one publicly listed firm, we hypothesize that private firms can partially relieve their financial constraints through the cash proceeds from share pledging of publicly listed firms by the common controlling shareholder. Using data from publicly listed Chinese firms, we find results consistent with this hypothesis, especially for private firms facing greater financial constraints. However, such share pledging also creates a negative spillover on shareholder value of publicly listed firms under common ownership.

Keywords: Financial constraints; Share pledging; Common ownership; Spillover; China (search for similar items in EconPapers)
JEL-codes: D22 G32 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000421

DOI: 10.1016/j.jcorpfin.2023.102393

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