Controlling shareholder equity pledging and tone management: Evidence from China

Manman Li and Luguang Qi

Research in International Business and Finance, 2025, vol. 74, issue C

Abstract: This study explores the market value management motives of controlling shareholders with equity pledges focusing on non-financial information. Our findings reveal that controlling shareholder equity pledging (CSEP) positively affects the tone management of corporate annual reports. We establish causality using a range of techniques, including a difference-in-differences method based on a regulatory change. Mechanism analyses suggest that this relationship is primarily the result of controlling shareholders’ incentives to mitigate the risk of control transfer and their ability to manipulate the tone of annual reports. The effect of CSEP is more significant in firms with shorter CEO tenures, distracted institutional investors, and higher analyst attention. While tone management may temporarily enhance market value, it diminishes the accuracy of analysts’ forecasts. Finally, we document a timing effect in the annual report disclosures of these firms. Our study reveals that tone management is a strategic tool for listed firms with CSEP to reduce pledge risk, which provides valuable insights for information users and regulators.

Keywords: Controlling shareholder; Equity pledging; Annual report; Tone management (search for similar items in EconPapers)
JEL-codes: G14 G30 M14 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924005026
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:riibaf:v:74:y:2025:i:c:s0275531924005026

DOI: 10.1016/j.ribaf.2024.102709

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().