 Foreign institutional investors and share pledging: Evidence from China's stock market openness reformJin Jiang, Baolong Liu and Rui Ye Global Finance Journal, 2025, vol. 66, issue C Abstract: This study explores the governing influence of foreign institutional investors (FIIs) on controlling shareholders' share pledging activities. The Shanghai–Hong Kong and the Shenzhen–Hong Kong Stock Connect programs represent exogenous shocks to Chinese stock market openness by introducing FIIs. Using a staggered difference-in-differences research design, our results demonstrate that stock market openness caused controlling shareholders at connected firms to be less likely to pledge shares and more likely to inject funds from pledging back into the underlying firm compared with controlling shareholders at unconnected firms. Additional analyses validate our conjecture that the monitoring role of FIIs diminishes connected firms' agency problems. Furthermore, the effects of stock market openness are more significant for nonstate-owned enterprises and firms in regions with strong institutional environments. The results of this study imply that FIIs can act as an effective governance mechanism in emerging markets to improve stock market integrity and protect minority investors. Keywords: Stock market openness; Foreign institutional investors; Share pledging; Emerging market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:66:y:2025:i:c:s1044028325000493 DOI: 10.1016/j.gfj.2025.101122 Access Statistics for this article Global Finance Journal is currently edited by Manuchehr Shahrokhi More articles in Global Finance Journal from Elsevier |
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