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Controlling shareholders' equity pledge, digital finance, and corporate digital transformation

Author

Listed:
  • Zhang, Yue
  • Ge, Mengshuai
  • Yang, Jiaju
  • Liu, Cuiying
  • Chen, Xi

Abstract

Corporate digital transformation (CDT) is an inevitable choice for stimulating business vitality and cultivating market competitiveness. This paper focuses on the impact of controlling shareholders' equity pledge (CSEP) on CDT. Based on the theoretical background, an empirical analysis was conducted using data on listed corporations in China from 2011 to 2021. The results show that CSEP has an inverted U-shaped nonlinear impact on CDT. Meanwhile, digital finance plays a moderating role in the relationship between CSEP and CDT. At lower levels of digital finance development, the impact of CSEP on CDT remains inverted U-shaped. However, when digital finance reaches medium and higher levels of development, the impact of CSEP on CDT shows a linear promotion effect, and the higher this level, the stronger the promotion effect. Finally, from the perspective of share price collapse risk and controlling shareholders' appropriation behavior, we verify that the motives for preventing control transfer risk and appropriation are important reasons for the inverted U-shaped impact of CSEP on CDT.

Suggested Citation

  • Zhang, Yue & Ge, Mengshuai & Yang, Jiaju & Liu, Cuiying & Chen, Xi, 2023. "Controlling shareholders' equity pledge, digital finance, and corporate digital transformation," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003691
    DOI: 10.1016/j.irfa.2023.102853
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