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Stock pledge restrictions and investment efficiency

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  • Huang, Zhi-xiong
  • Li, Xiaozhong
  • Zhao, Yuheng

Abstract

This paper examines the effect of stock pledge restriction (SPR) on the firm's investment efficiency. By introducing a plausibly exogenous stock pledge regulation, we find that SPR promotes the improvement of investment efficiency, which is mainly reflected in the reduction of overinvestment. Furthermore, the positive association between SPR and investment efficiency is more particularly pronounced for non-state-owned firms, firms with weak financing constraints and firms with high risk-taking. These findings provide new evidence on the importance of capital constraints in corporate efficiency. Overall, this study provides new insight about the real effect of SPR on investment efficiency, which may be of interest to regulators who are concerned with the transaction risk prevention and the efficiency of enterprise resource allocation.

Suggested Citation

  • Huang, Zhi-xiong & Li, Xiaozhong & Zhao, Yuheng, 2022. "Stock pledge restrictions and investment efficiency," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001386
    DOI: 10.1016/j.frl.2022.102864
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    Cited by:

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    3. Yan, Guan & Liu, Zhidong, 2023. "Interconnectedness of financial institutions based on pledged shares in China," Finance Research Letters, Elsevier, vol. 57(C).
    4. Wang, Maochuan & Yan, Youliang, 2023. "The dark side of investor interactive platforms: Evidence from corporate investment efficiency," Finance Research Letters, Elsevier, vol. 57(C).
    5. Zhai, Minhan & Wu, Wenqing & Tsai, Sang-Bing, 2025. "The effects of Artificial intelligence orientation on inefficient investment: Firm-level evidence from China's energy enterprises," Energy Economics, Elsevier, vol. 141(C).
    6. 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).
    7. Hou, Fei & Li, Meina & Xu, Yang & Zhou, Song, 2023. "Signing auditors’ cultural background and client investment efficiency," Finance Research Letters, Elsevier, vol. 51(C).
    8. Zhou, Jia, 2025. "Impact of non-financial listed companies' investment in wealth management products on industrial investment efficiency and R&D expenditure: A dual effect analysis," International Review of Financial Analysis, Elsevier, vol. 97(C).
    9. Feng, Xiaocui & Yu, Ruiqing, 2025. "How does digital transformation affect corporate risk-taking? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 97(C).
    10. Xie, Linlin & Zuo, Shiyue & Xie, Ziqin, 2023. "Environmental protection fee-to-tax and enterprise investment efficiency: Evidence from China," Research in International Business and Finance, Elsevier, vol. 66(C).
    11. Zhao, Xin & Zhai, Guoqing & Charles, Vincent & Gherman, Tatiana & Lee, Hyoungsuk & Pan, Tuan & Shang, Yuping, 2024. "Enhancing enterprise investment efficiency through artificial intelligence: The role of accounting information transparency," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    12. Minh-Quan Nguyen & Nhat-Tan Le & Khuong Nguyen-An & Duc-Thi Luu, 2024. "An Integral Equation Approach for the Valuation of Finite-maturity margin-call Stock Loans," Papers 2407.14728, arXiv.org.
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    More about this item

    Keywords

    Stock pledge restriction; Investment efficiency; Financing constraints;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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