Stock pledge restrictions and investment efficiency

Zhi-xiong Huang, Xiaozhong Li and Yuheng Zhao

Finance Research Letters, 2022, vol. 48, issue C

Abstract: This paper examines the effect of stock pledge restriction (SPR) on the firm's investment efficiency. By introducing a plausibly exogenous stock pledge regulation, we find that SPR promotes the improvement of investment efficiency, which is mainly reflected in the reduction of overinvestment. Furthermore, the positive association between SPR and investment efficiency is more particularly pronounced for non-state-owned firms, firms with weak financing constraints and firms with high risk-taking. These findings provide new evidence on the importance of capital constraints in corporate efficiency. Overall, this study provides new insight about the real effect of SPR on investment efficiency, which may be of interest to regulators who are concerned with the transaction risk prevention and the efficiency of enterprise resource allocation.

Keywords: Stock pledge restriction; Investment efficiency; Financing constraints (search for similar items in EconPapers)
JEL-codes: G30 G31 G38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001386

DOI: 10.1016/j.frl.2022.102864

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