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Board independence, promoter influence, and share pledging behavior

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  • Musunuru, Praveena
  • Jawed, Mohammad Shameem
  • Krishnan, Kaveri

Abstract

This study examines the relationship between board independence and share-pledging behavior by controlling shareholders (promoters) in Indian listed firms from 2010 to 2020 using a balanced panel. Further, we examine the interplay between the independence of the board and the presence of the promoter as an executive director on the board and its impact on the share pledging by promoters. Our findings reveal that independent boards serve as a deterrent to share pledging by promoters, especially when independent directors actively participate. However, this deterrent effect diminishes when promoters hold executive positions on the board. Moreover, unlike business group firms, board independence fails to deter share pledging in concentrated standalone firms. Furthermore, we examine whether independent boards encourage promoters to provide fair reasons for share pledging following a regulation in 2019. Our analysis confirms that independent boards incentivize promoters to provide transparent and justifiable reasons for engaging in share pledging. However, promoters on board reduce this effect.

Suggested Citation

  • Musunuru, Praveena & Jawed, Mohammad Shameem & Krishnan, Kaveri, 2026. "Board independence, promoter influence, and share pledging behavior," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x26000053
    DOI: 10.1016/j.pacfin.2026.103059
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