Unpacking the black box: Board co-option and equity pledging by controlling shareholders

Ziqi Li, Zhihao Cai and Ho-Chuan Huang

Finance Research Letters, 2025, vol. 82, issue C

Abstract: This study examines the impact of board co-option on controlling shareholders’ equity pledging using data from Chinese A-share listed firms (2003–2023). Results show that board co-option significantly reduces equity pledging, with male directors having a stronger inhibitory effect. Mechanism tests confirm that this effect operates through reduced financing constraints, while heterogeneity analyses reveal stronger impacts in non-state firms, high-investment firms, and large-scale firms. These findings contribute to corporate governance literature and offer regulatory insights for mitigating equity pledging risks in emerging markets.

Keywords: Controlling shareholder; Equity pledge; Board co-option; Gender mix (search for similar items in EconPapers)
JEL-codes: C23 G30 G34 G39 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008578

DOI: 10.1016/j.frl.2025.107598

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