The impact of equity pledge on inefficient investment: a perspective from family entrepreneurship

Guangcheng Ma (), Qiyue Xiao and Xiaozhong Yang ()
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Guangcheng Ma: Shanghai University of Finance and Economics
Qiyue Xiao: Shanghai University of Finance and Economics
Xiaozhong Yang: Nanjing University of Finance and Economics

International Entrepreneurship and Management Journal, 2024, vol. 20, issue 2, No 5, 661 pages

Abstract: Abstract As an efficient and convenient financing method, equity pledges may have a heterogeneous impact on the inefficient investment of family firms. In order to verify this point, this paper takes A-share listed family enterprises from 2010 to 2021 as a research sample. It conducts an empirical test on the impact of equity pledges on inefficient investment in family firms by constructing a panel regression model. The results show that equity pledges can inhibit the inefficient investment of family firms. The social-emotional wealth factor weakens the encroachment effect of the controlling shareholder’s equity pledge on the enterprise and shows a specific governance effect. Further research found that the inhibitory effect of equity pledges on the inefficient investment of family firms is only significant in over-investment. It is more effective when a family firm employs a general manager through internal promotion than other means. In addition, when a family firm is run by one generation in control, this inhibitory effect can also be enhanced due to its more vital socioemotional wealth for the family firms. Our research can provide crucial theoretical guidance and decision-making reference for preventing and controlling the operational risks of real enterprises in developing countries. At the same time, this research can also provide a way for developed countries to understand China's economic operation.

Keywords: Equity pledge; Family firms; Inefficient investment; Over-investment; Socioemotional wealth (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11365-023-00886-x

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