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Unpacking the black box: Board co-option and equity pledging by controlling shareholders

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  • Li, Ziqi
  • Cai, Zhihao
  • Huang, Ho-Chuan

Abstract

This study examines the impact of board co-option on controlling shareholders’ equity pledging using data from Chinese A-share listed firms (2003–2023). Results show that board co-option significantly reduces equity pledging, with male directors having a stronger inhibitory effect. Mechanism tests confirm that this effect operates through reduced financing constraints, while heterogeneity analyses reveal stronger impacts in non-state firms, high-investment firms, and large-scale firms. These findings contribute to corporate governance literature and offer regulatory insights for mitigating equity pledging risks in emerging markets.

Suggested Citation

  • Li, Ziqi & Cai, Zhihao & Huang, Ho-Chuan, 2025. "Unpacking the black box: Board co-option and equity pledging by controlling shareholders," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008578
    DOI: 10.1016/j.frl.2025.107598
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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