Major shareholders' equity pledge and the “All talk and no action” strategy in digital transformation

Hui Zhou

Economic Analysis and Policy, 2025, vol. 87, issue C, 1630-1652

Abstract: Based on data from Chinese-listed companies, this study examines the impact of major shareholders' equity pledges on firms' "all talk and no action" strategies in digital transformation, with increased disclosure of digital transformation information but limited actions in digital transformation. It finds that equity pledges induce the "all talk and no action" strategy. Mechanism tests reveal that major shareholders with pledged equity pursue this strategy to mitigate risks of control transfer. This effect is more pronounced for companies with higher investor attention, and practical difficulties related to digital transformation, but extensive media coverage and institutional oversight (shareholding and site visits) can mitigate such an effect. Additionally, there is no significant difference in the short-term valuation levels between companies with equity pledges and those without when the level of digital transformation disclosure is similar. Thus, investors do not perceive a significant difference in digital transformation disclosures between companies with and without equity pledges. However, the strategy of "all talk and no action" diminishes long-term performance and increases stock price crash risk, especially for companies with equity pledges.

Keywords: Equity pledge; All talk and no action strategy; Digital transformation; Information disclosure; Actions (search for similar items in EconPapers)
JEL-codes: G31 M41 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592625003091
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1630-1652

DOI: 10.1016/j.eap.2025.07.036

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().