Controlling Shareholder Equity Pledge and Non-financial Information Disclosure - An Empirical Study Based on the Text and Financial Data of Listed Companies in China

Xixi Ye; zhanhao zheng

doi:10.62177/apemr.v1i6.137

Authors

Xixi Ye
zhanhao zheng Wenzhou Polytechnic

DOI:

https://doi.org/10.62177/apemr.v1i6.137

Keywords:

Disclosure of Non-financial Information, Equity Pledge, Annual Report Text Information, Controlling Shareholder

Abstract

In recent years, as the proportion of non-financial information in the company's external disclosure information continues to rise, its text information characteristics and the motivation behind it have gradually been valued by regulators and academia. This paper uses the management discussion and analysis data of listed companies and the equity pledge data of controlling shareholders from 2007 to 2020 to conduct a relatively comprehensive investigation on the motivation for non-financial information disclosure. The main research is on the impact of the controlling shareholder's equity pledge on the readability of the annual report text of listed companies. And a heterogeneity analysis is conducted from the perspective of equity nature. The study concluded that the readability of the Chinese text of the annual report disclosure of listed companies with controlling shareholders' equity pledges and listed companies with larger equity pledge scales is worse. This confirms that there is a behavior of beautifying the non-financial information disclosure of listed companies after the controlling shareholder's equity pledge. However, this conclusion is mainly significant in non-state-owned enterprises. The empirical analysis of this paper also found that the internal governance of listed companies and the operating conditions of listed companies will have an impact on the non-financial information disclosure behavior of listed companies' annual report disclosure after equity pledge. This study has the following contributions: First, new motivations for non-financial information disclosure are discovered, thereby enriching the literature on the motivation for non-financial information disclosure. Secondly, this paper enriches the literature on the economic consequences of equity pledge by controlling shareholders. Finally, this paper answers the question of "why non-financial information disclosure can be manipulated" from the perspective of the second type of agency. This result can provide a useful reference for improving the relevant regulatory system of listed companies in my country.

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